By Anjuli Davies
LONDON, Oct 29 (Reuters) - Europe's biggest investment banksare slimming down in a fight for survival, eight years after theglobal financial crisis wrought regulatory changes and sparkedlitigation costs that have left them still struggling to achieveprofitability.
Deutsche Bank is embarking on "Strategy 2020",Barclays on "Strategy Refresh" and Credit Suisse is "right-sizing". The treatment looks familiar:change management, launch a strategic review, scale back, cutjobs, shed assets and slash costs.
Less predictable is whether such measures will make themlean, mean and freshly competitive.
Retrenching and cost-cutting European investment banks areon course to lose market share to their bigger U.S. rivals forthe 10th straight year in 2015, leaving the continent in dangerof having no global champion.
U.S. investment banks restructured and recapitalised sooner,buoyed by being based in the world's largest and most lucrativemarket for fees.
Wall Street banks are estimated to make an average return onequity (ROE) of 12.4 percent in 2015, versus 8.3 percent fortheir European peers, Morgan Stanley analysts calculate.
But not all is gloom in Europe.
Switzerland's UBS for instance exemplifies howscaling back can reap rewards, having drastically restructuredits investment bank in 2012. It's forecast to make an ROE of16.1 percent in 2015.
John Cryan, Deutsche Bank's new chief executive, said onThursday he would cut 15,000 jobs at Germany's biggest bank,exit 10 countries and cut costs to less than 22 billion euros by2018.
That should bring its costs down to about 70 percent ofrevenue in 2018, still glaringly higher than U.S. rivals likeGoldman Sachs, JPmorgan and Citi, where thefigure stands below 60 percent.
Cryan, a former UBS finance director, had already announcedhe would split Deutsche's investment bank in two. In both itsGlobal Markets division, which will house sales and tradingactivities, and Corporate and Investment Banking (CIB), the bankwill halve its number of clients. It said that's because 30percent of clients produce 80 percent of revenue.
PROFIT SQUEEZE
Its trading unit will also exit certain products in fixedincome and currencies, where profits have been squeezed by newcapital rules and moves towards electronic trading.
"At the margin, the restructuring is more aggressive, whichis good longer-term," Nicholas Melhuish, head of global equitiesat Amundi Asset Management, one of Deutsche Banks's 10 largestinvestors, told Reuters. "The issue is what you are left with atDB once you shrink the investment bank."
Credit Suisse, whose new CEO Tidjane Thiam announced bigrestructuring plans on Oct. 21, is emphasising wealth managementand growing in Asia.
Alongside raising 6 billion Swiss francs from investors, CSwill cut 1,600 jobs in its home market and relocate up to 1,800positions from London where costs are particularly high.
It also plans to lower capital used by the investment bank,mainly in its "macro" businesses, which includes foreignexchange and rates trading products, and where the bank plans toreduce risk-weighted assets by 72 percent by year end.
Like executives at cross-town rival UBS, however, Thiamremains convinced that "to be a winner in private banking youneed to be good at investment banking."
Britain's Barclays, meanwhile, is just over halfway througha three-year plan to cut 19,000 jobs, including 7,000 in theinvestment bank. This week it appointed former JPmorganinvestment bank boss James "Jes" Staley as its third new CEOsince the 2008 crisis.
American-born Staley, 58, faces challenges includingimproving Barclays' reputation after a series of scandals,cutting costs and deciding how big an investment bank it shouldkeep.
Echoing the shift taking hold across Europe, Barclaysinvestment bank boss Tom King recently said the focus isstrictly on returns rather than revenue, and sources have saidthat will not change under Staley.
"That means not being everything to everybody," said King."But picking our spots and being excellent where we choose tocompete." (Additional reporting by Sinead Cruise in London and SilviaAloisi in Milan; Editing by David Holmes)
Barclays (BARC)
