The profit goals are too ambitious, analysts said. They noted that a bank that has consistently disappointed shareholders in recent years is focusing its attention on a famously competitive home market and the relatively low-margin business of servicing companies' routine financing needs. Dividends will be withheld this year and next and its capital position will be reduced to pay for the restructuring that's forecast to cost 7.4 billion euros - equal to more than half its market value.
Deutsche Bank shares dropped as low as 6.65 euros in Frankfurt after initially rising as high as 7.49 euros. They ended the day 5.9 per cent lower. Its riskiest bonds also reversed early gains, reflecting credit investors' similar second thoughts. The overhaul sets up a corporate bank "to focus our bank on where we are most competitive," Sewing said Monday. The "days of spectacular ambition" in investment banking are over, he said, with the goal to make the division "fiercely competitive, well respected and sustainably profitable."
Hope that anything would change for the better on its own soon evaporated. When someone asked the global head of equities, Peter Selman, at a meeting of the investment bank's executive committee for an estimate of when the unit would return to a profit, he first refused to give an answer and then suggested it certainly wasn't going to be before 2022, according to a person briefed on the matter.
They analysed business by business to establish how profitable - or unprofitable - each one was, the people said. Identifying the associated costs of each unit was a key component of the review, including each one's cost of funding and its share in the expenses for back office staff - for example for anti-money laundering and compliance - that can't be strictly allocated to just one unit.
Initial reactions in Germany were favorable. The labor union ver.di - a powerful voice thanks to its many seats on Deutsche Bank's supervisory board - said it "welcomes" the reduction of the investment bank, though it also said it will insist job cuts in Germany happen in a "socially compatible" way.