Monday, October 17, 2016
REPORT: Deutsche Bank could cut back its US operation
Deutsche Bank is considering scaling back its US operations amid spiralling legal and capital costs, according to multiple reports.
Bloomberg and the German paper Sueddeutsche Zeitung are reporting that management at the bank has discussed cutting back investment-banking operations in the US to save money.
The German newspaper Die Welt am Sonntag reports that a pullback of US operations could be part of a deal with the US Department of Justice over misselling of mortgage-backed securities in the run-up to the 2007 US housing crisis.
Deutsche Bank declined to comment when contacted by Business Insider.
Deutsche Bank has plunged into crisis after reports surfaced suggesting that the Department of Justice was seeking a $14 billion (£11.5 billion) settlement with Germany's biggest bank over the case. That total is bigger than Deutsche Bank's market capitalisation and sent shares tumbling.
Deutsche Bank CEO John Cryan was forced to tell the market that the bank would not settle at that level and expected the eventual fine to be much lower. Cryan also said the bank had no plans to raise capital.
But cutting back on the US investment-banking operations could be a way of raising capital internally should Deutsche need it. The bank is required to set aside a certain amount of capital to fund investment-banking activities, so that capital would be freed up if these activities were scaled back.
About 10% of Deutsche Bank's total employees are based in North America, according to Bloomberg, equivalent to just over 10,000 people.
The bank, Germany's biggest, is already carrying out a major restructuring that will see 9,000 jobs go. Reuters reported earlier this month that a further 10,000 jobs could go.