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Deutsche Bank Overhaul Could Cost as Much as $5.7 Billion

Deutsche Bank Overhaul Could Cost as Much as $5.7 Billion

(Bloomberg) -- Deutsche Bank AG Chief Executive Officer Christian Sewing’s plan to overhaul the company’s securities arm could cost as much as 5 billion euros ($5.7 billion), according to a person familiar with the matter.

The expenses may tip the German lender into a loss this year, Financial Times reported, citing three unidentified people familiar with the matter. The CEO also wants to cut Deutsche Bank’s annual expenses by about 4 billion euros by 2022, up from a target of 1 billion euros this year, the FT said. A Deutsche Bank spokesman declined to comment.

Deutsche Bank Overhaul Could Cost as Much as $5.7 Billion

Sewing is poised to unveil the bank’s restructuring strategy as soon as this week after a long series of previous turnaround efforts failed to lift profitability. He’s now working on a headcount reduction -- as many as 20,000 positions -- the scaling back of some investment banking businesses as well as asset disposals, people familiar with the matter have said.

The restructuring may lead to charges of 3 billion euros to 5 billion euros, the FT reported. That’s in line with estimates from some analysts. Bank of America Corp. said earlier this week that Deutsche Bank may need to raise 5 billion euros from investors. Sewing is seeking to avoid a capital increase because it would further dilute the holdings of shareholders who’ve already seen the value of their stock tumble, people familiar have said.

Shares Rose

Deutsche Bank rose 2.2% to 6.90 euros as of 4:28 p.m. in Frankfurt. The stock has fallen about 1% this year.

Deutsche Bank is also preparing to lower a minimum target for its capital strength -- known as the CET1 ratio -- to 12.5%, although plans to maintain a ratio above that level, the FT said, citing one unidentified person. The ratio stood at 13.7% at the end of March, above both its current goal of more than 13% and the 11.8% required by the European Central Bank.

The bank had been sounding out the ECB and other watchdogs on lowering its capital cushion to help finance the impending restructuring, Bloomberg reported earlier this week, citing people familiar with the matter. Deutsche Bank has a surplus of about 6.6 billion euros of capital to its minimum requirement set by the ECB, according to calculations by Bloomberg.

To contact the reporters on this story: Steven Arons in Frankfurt at sarons@bloomberg.net;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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