Deutsche Bank Delays Historic Job Cuts Program as Virus Spreads
(Bloomberg) -- Deutsche Bank AG became the latest bank to halt plans for widescale layoffs, joining lenders including HSBC Holdings Plc and Lloyds Banking Group Plc in putting thousands of job cuts on hold because of the coronavirus outbreak.
“To avoid additional emotional distress in the current environment, we will defer new communications of individual restructuring actions to potentially affected employees,” the Frankfurt-based bank said in a memo to staff seen by Bloomberg. “The pause will be in place until we see a return to greater stability in the world around us.”
Chief Executive Officer Christian Sewing last summer announced plans to cut almost 18,000 jobs over the next three years as part of a huge restructuring to restore the bank to profitability after half a decade of losses. The lender is exiting equities sales and trading and reducing its key fixed income business as part of Sewing’s plans to compete where it has a top 5 position. Sewing, who is suspending the dividend to help pay for the reorganization, has already reduced the workforce by about 4,000.
“Deutsche Bank is in a tough spot,” Berenberg analysts led by Eoin Mullany wrote in a note on Wednesday prior to the staff memo. Carrying out the restructuring according to plan “in the middle of the COVID-19 situation is incredibly difficult.”
Sewing has tried to reassure employees and investors of the bank’s resilience during the outbreak, saying earlier this month that business so far this year continued the positive trend of the fourth quarter. The price of Deutsche Bank’s credit default swaps had fallen to a multi-year low ahead of the virus outbreak, while shares had rallied, as investors were beginning to see progress in the turnaround.
The German lender said in the memo it remains committed to its transformation and cost targets, and that it will allocate resources “to our most critical projects and regulatory commitments to ensure we remain on track.”
Deutsche Bank’s announcement comes shortly after several other lenders including HSBC Holdings Plc, Credit Suisse Group AG and Morgan Stanley said they are pausing job reductions. Most cited the current economic hardship brought on by the virus crisis.
“I don’t think it’s in this kind of situation that we’re going to announce restructuring measures,” Societe Generale CEO Frederic Oudea said at a conference last week. “There is a question of decency.”
Deutsche Bank said in the memo it will complete all discussions with individual staff about layoffs that have already been initiated. The vast majority of those discussions have been signed and are near finalization, it said.
As it grapples with the coronavirus crisis, Deutsche Bank is also considering joining government-funded program that allows companies to put workers on shorter hours without a deep cut to their pay. The lender told staff it will give an update on its progress when the company reports first-quarter earnings late next month.
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