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Deutsche (DB) Plans Massive Layoff in U.S. Investment Bank

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Per a Reuters article, Deutsche Bank DB is planning to cut about 10% of its current U.S. workforce, in sync with its plan to reduce global exposure of the investment banking division.

Citing people familiar with the matter, Reuters reported that about 1000 employees may be laid off. This follows the trimming of 400 positions from its trading and corporate finance business in the United States.

The German lender reported huge year-over-year fall in first-quarter net income along with lower revenues from its largest segment — Corporate & Investment Bank. Along with disappointing results, the bank’s new CEO, Christian Sewing disclosed his plans to achieve cost savings by reducing workforce significantly.

The company seeks to withdraw from the U.S. and Asian markets due to limited cross border activities. Further, Deutsche Bank will scale back activities in U.S. rates sales and trading, shrinking the balance sheet. It will also review its Global Equities business.

However, the bank plans to increase focus on its European client base and on financing and underwriting products, in which it has a strong hold.

The bank will remain committed to its European business, which given its scale and relevance to client base, generates more attractive returns. In a statement emailed to Reuters, the bank said, "Europe is the region in which we want to expand our market position. Here we want to grow and gain market share. Especially in Europe, we are the first choice for many investment bankers."

Recently, Moody's Investors Service changed its outlook to negative from stable on some of Deutsche Bank ratings saying, “The replacement of the CEO, departure of other senior executives and the abrupt change in the direction of the investment bank highlight the strategic turmoil within the bank -- a credit negative development.”

The bank still seems to be a long way from achieving a significant turnaround considering the lingering headwinds.

In six months’ time, the company’s shares have lost more than 14% on the NYSE against slight growth recorded by the industry.

Deutsche Bank carries a Zacks Rank #5 (Strong Sell).

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The Bank of N.T. Butterfield & Son Limited NTB carries a Zacks Rank of 2. Its earnings estimates for 2018 have been revised 2.9% upward over the last 60 days. Also, its shares have gained 20.3% in the past three months.

BanColombia S.A. CIB carries a Zacks Rank of 2. The Zacks Consensus Estimate for the company has jumped 1.8% for the current year, in the last 60 days. Its share price has gained 5.1% in the past three months.

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