Deutsche Bank's Patchy Job Cutting Track Record in Four Charts

(Bloomberg) -- Deutsche Bank AG plans to make deep job cuts to revive profit and boost a depressed share price, but a look at the lender’s past attempts to eliminate staff costs suggests that it’s not always easy to achieve.

Chief Executive Officer Christian Sewing plans to eliminate about 18,000 positions by 2022, or a fifth of the total, in the biggest reduction in the bank’s recent history. However some investors have bemoaned the company’s failure to deliver on earlier plans as staffing remained relatively expensive and reductions were undone by acquisitions and other hiring. Here are four charts that show Deutsche Bank’s past attempts to fire staff and how they fell short.

Past rounds of job cutting have had little effect on overall headcount. The 14,500 cuts ex-CEO Josef Ackermann announced in 2002 were canceled out by acquisitions including consumer lender Deutsche Postbank AG in 2010. His immediate successors reduced some positions while hiring more compliance officers to tackle the bank’s misconduct. Sewing’s predecessor, John Cryan, started deeper cuts, but that was partly offset when he hired back employees the bank had previously outsourced. Sewing has made more progress in lowering the total. Deutsche Bank said it expects some workers to transfer to BNP Paribas SA after the French Bank agreed to take over parts of its equities business, including hedge fund clients.

Deutsche Bank’s workforce earns fewer dollars for the bank on average than employees at several competitors. While executives have said that’s at least partly due to insufficient automation, the bank’s focus on securities trading has left it more exposed to a decline in revenue from that business. Competitors in Switzerland and the U.K. have been able rely on wealth management and consumer units to make up for the trading slump. Deutsche Bank’s biggest backup, retail banking in Germany, proved less lucrative.

Even if job numbers fall, Deutsche Bank has struggled to significantly lower what it spends on people. That’s partly because of what the bank pays to keep talented staff from joining the competition. The leadership of the firm’s investment bank, which traditionally has the highest-paid staff, had reportedly fought for competitive remuneration to regain market share. Still, that has yet to pay off. While Deutsche Bank cut its compensation expenses by 3.6% last year, it was less than the 4.3% decline in revenue.

Sewing’s newest round of cuts will be the largest in at least two decades. The closest comparison is Ackerman’s 2002 plan, but those reductions were split across several programs. The ex-CEO’s goal of lifting underlying return on equity to 25% before tax drew criticism from German politicians became a symbol of excesses before the financial crisis. He subsequently backed away from the target and the bank went on to miss later profitability goals. Deutsche Bank currently seeks an after tax return of 8% by 2022, even though it holds more equity now than under Ackermann.

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen

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