Deutsche Bank posts sharp decline in net profits

Deutsche Bank's new CEO Christian Sewing

In a quarterly-earnings statement Thursday, Deutsche said it would scale back certain areas of its struggling global investment banking business as part of a firm-wide restructuring meant to reverse declining profits.

Deutsche Bank said on Thursday that it wants to focus its corporate finance business on industries that align with its European clients or areas where it has a leadership position.

Net profit at the Frankfurt-based group fell 79 percent year-on-year to 120 million euros (US$146 million). "This is what we will focus on more decisively". "There is no time to lose as the current returns for our shareholders are unacceptable". The actions reflect pressures on the lender to scale back its global ambitions and cut costs after years of losing market share to stronger banking rivals.

James von Moltke, chief financial officer at Deutsche Bank, says USA operations will be shrinking. The company said the year-on-year development was primarily driven by exchange rate movements, notably the appreciation of the euro against the United States dollar, and lower revenues in the Corporate & Investment Bank.

"Commitment to sectors in the USA and Asia, in which cross-border activity is limited, will be reduced", it added. Revenue in its private and commercial bank unit was 2.63 billion euros, down 2 percent. His ouster this month also claimed another top executive, Marcus Schenck, a former deputy CEO who had been lobbying for a strong securities unit.

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Among 2 analysts covering Deutsche Bank AG Common Stock (NYSE:DB), 0 have Buy rating, 1 Sell and 1 Hold. Garth Ritchie was elevated to the sole head of corporate and investment banking following Schenck's departure.

The reduction in headcount is "painful but regrettably unavoidable to ensure our bank's competitiveness in the long run", he said, without giving a number.

Thursday's announcement offers a clearer picture of how Deutsche will restructure under Sewing. First Republic Investment Management Inc. bought a new stake in Deutsche Bank in the 3rd quarter valued at $180,000.

The cuts will result in job losses and include a scaling-back of its business with hedge funds. Deutsche Bank said that the measures would lead to a "significant reduction" in the workforce in the current year. Sewing said during a conference call with analysts that the announced investment bank restructuring will be implemented "very, very quickly".

The corporate and investment bank will be shifted to focusing on its European and multinational clients, "while reducing its exposure to other areas". The figure was short of analyst expectations for 374 million euros and down sharply from 575 million euros a year earlier.

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