Deutsche Bank AG’s CEO Christian Sewing has downsized 3,500 of the financial institution's workforce to bolster its profit and increase investor revenue, Bloomberg reports.
The Frankfurt-based bank revealed the reductions while announcing an increased mid-term revenue benchmark. Most of the cutbacks involve back-office positions as part of its planned cost-savings. It plans to return €1.6 billion to shareholders in Q1 2024, including a €675 million stock buyback.
Sewing is intensifying efforts to raise the bank's stagnant share price to be more influential in driving banking consolidation across Europe. Despite previous gains from increased interest rates, challenges include a trading downshift, high inflation, and the need for investments to address control issues.
Deutsche Bank’s Q4 2023 results reflected its challenges. In spite of a five percent revenue gain from 2022, it didn’t match up with analysts’ forecasts due to a less-than-anticipated performance at the large fixed-income desk, where trading income only saw a one percent rise.
The European Union economy lost momentum after recording post-pandemic growth in 2021 and 2022. Following the start of the conflict in Ukraine, the bloc’s real GDP had shrunk by Q4 2022. This provoked a high cost of living, rising energy costs, a hike in interest rates, and inflationary pressure due to several sanctions packages that EU members and the United States levied on Russia after Moscow launched its special military operation in Ukraine.
The damaging economic consequences of the sanctions hamstrung Europe’s largest economy, Germany. High energy prices severely harmed the country’s industries, as the Chancellor Olaf Scholz-led government favored cutting off cheap Russian gas - the main production backbone of its heavy industry - and buying from alternative sources like the US at cut-throat prices. Berlin saw its GDP fall by 0.3 percent in Q4 2023 compared to the same period the previous year, according to its statistics office.
France, the EU's second-biggest economy, did not grow in last year’s fourth quarter, but managed to garner 0.7 percent in the previous three quarters of 2023.
“The massive tightening of monetary policy brought economic growth to a standstill in the summer. It is unlikely that the economy will emerge from this weak phase before the spring,” Christoph Weil, a senior economist at Commerzbank, wrote in a note seen by news outlets.
He contended that “persistently high inflation” will not yield interest rate cuts by the European Central Bank before summer.
An upswing in borrowing costs will escalate the capital costs, thereby dampening borrowing by businesses and households and suppressing the overall spending in the bloc’s economy.