Deutsche Bank posts worst quarterly loss in four years

German lender counts cost of plan to cut 18,000 jobs as it records €3.1bn shortfall

Deutsche Bank has made its biggest quarterly loss in four years as it counts the costs of plans to reduce its global workforce by 18,000.

The German lender made a €3.1bn (£2.8bn) net loss in the second quarter, driven by €3.4bn in costs related to job cuts and reorganisation at the bank.

Deutsche Bank expects the turnaround strategy to cost a total of €7.4bn and is aiming to return to profit next year.

It is the bank’s biggest quarterly net loss since the third quarter of 2015, when that figure reached €6bn, and is the second largest since the final months of 2008, when the financial crisis took hold. It also follows a €201m profit in the first quarter of 2019.

Even without the extra charges, Deutsche’s net income would have dropped by more than 40% to €231m in the second quarter, compared with the same period a year earlier. Further restructuring charges are expected to dent the bank’s earnings in the second half of the year and the lender is expected to report a full-year loss for 2019.

This month, Deutsche Bank announced the plans to cut about a fifth of its 91,500-member global workforce by 2022. Over the past two and a half weeks, more than 900 employees have either been handed their notice or told their role will be eliminated. Most were employed in the equity trading division, and the Guardian understands that hundreds have been lost from Deutsche’s City of London office.

1989-1999

It embarks on a period of global expansion, beginning with the acquisition of merchant bank Morgan Grenfell in the UK and other European markets such as Spain, where it buys Banco de Madrid. It consolidates its US operations into one, in an effort to take on the big beasts of Wall Street such as Goldman Sachs, and in 1999 it builds on its US foothold by snapping up New York-based Bankers Trust for $10bn.

2001

Deutsche Bank floats on the New York Stock Exchange, cementing its position as one of the major players, not just on Wall Street but in global banking.

2004-2008

Deutsche Bank becomes a leader in mortgage-backed securities, bundling up homeowners’ debt into huge packages and selling them on to investors. The bank continues to sell toxic mortgage-based investments even as the market turns south and it begins betting against such products itself. The bank reports its first annual loss for five decades for the 2008 financial year, losing €3.9bn.

2009

An internal investigation finds that the bank hired private detectives to spy on people it considered a threat – including a shareholder, a journalist and a member of the public. German prosecutors find no evidence of criminal wrongdoing or that senior executives were involved.

2015

It is fined $2.5bn (£1.7bn) by US and UK regulators for rigging the Libor interest rate, ordered to fire seven employees and accused of being obstructive towards regulators. Joint chief executives Anshu Jain and Jürgen Fitschen resign in the wake of the Libor scandal. The bank is fined a further $258m in the US for doing business with US-sanctioned countries like Iran and Syria.

2016

As regulators continue to sift through the wreckage of the banking crash, Deutsche takes a large slice of the blame. In September 2016, its shares slump on news that the institution faces a $14bn (£10.5bn) charge over mis-selling mortgage securities in the US. It eventually reaches a $7.2bn settlement with the US Department of Justice.

2017

UK and US regulators fine Deutsche more than $630m (£506m) after finding that the lender failed to prevent $10bn of Russian money laundering via 'mirror trades', which had no economic purpose and served only to transfer money covertly.

2018

New York financial regulators hand down a fresh fine, just $205m this time, for 'lax oversight' in the bank’s foreign exchange business when it was the world’s largest dealer in foreign currency.

Christian Sewing takes over as chief executive and after three consecutive years of heavy losses, he slashes 7,000 jobs from Deutsche’s bloated investment banking arm.

2019

Deutsche enters merger talks with another troubled German lender, Commerzbank. The talks fall apart in April 2019, scuppering plans for a bank that would have been the eurozone’s second largest. Sewing announces 18,000 jobs cuts, 20% of its workforce, with the axe falling worldwide.

Rob Davies

It is unclear how many jobs will go in London, where Deutsche Bank is one of the Square Mile’s largest employers with about 7,000 staff.

The company’s shares were down 2.3% at €6.97 in afternoon trading on Wednesday.

In a message to staff, the chief executive, Christian Sewing, said: “The past few weeks have been extremely challenging for all of us … but we can say with confidence that we have passed the first hurdle

“By and large our strategy is no longer being called into question, either by our investors or by the media or – most importantly – by our clients. And I have the impression that you too believe we are on the right track.”

Sewing said the job cull had been “painful” but that it was important not to leave staff “in limbo”. “Where our restructuring creates the need for further reductions, we will do everything we can to be able to communicate our decisions as soon as possible.”

Deutsche Bank also confirmed negotiations were on track to sell part of its trading business to BNP Paribas. The deal would involve moving Deutsche staff over to its French banking rival, with some reports suggesting up to 300 jobs could be saved as a result.

Contributor

Kalyeena Makortoff Banking correspondent

The GuardianTramp

Related Content

Article image
Deutsche Bank slashes 7,000 jobs, with City likely to take hit
Bank announces investment arm will lose one in four jobs only hours before AGM

Julia Kollewe and Graeme Wearden

24, May, 2018 @3:18 PM

Article image
Fresh fears hit Deutsche Bank share price
Shares slump 3% on NYSE after renewed doubts over Germany’s biggest bank’s ability to pay US penalty

Jill Treanor

03, Oct, 2016 @4:35 PM

Article image
Deutsche Bank and Commerzbank merger threatens 30,000 jobs
Unions’ warning over merger is the latest drama to hit 150-year-old lender Deutsche

Kalyeena Makortoff Banking correspondent

18, Mar, 2019 @8:56 PM

Article image
The $14bn Deutsche Bank fine – all you need to know
Why is Germany’s biggest bank in $14bn worth of trouble and can it afford the huge US fine? Find out here …

Jill Treanor

16, Sep, 2016 @4:54 PM

Article image
Time to raise eurozone interest rates, says Deutsche Bank chief
John Cryan says bubbles are emerging in parts of market ahead of European Central Bank monetary policy meeting

Jill Treanor

07, Sep, 2017 @7:59 AM

Article image
Europe's banks 'not investable' says top banker amid Deutsche Bank crisis
Credit Suisse chief issues warning as German government denies claims it is preparing to bail out country’s biggest bank

Philip Oltermann in Berlin and Jill Treanor

28, Sep, 2016 @11:45 AM

Article image
Shares in Deutsche Bank sharply up amid speculation of DoJ deal
Stock slumped below €10 before rising to €11.57 as report suggests bank might pay just over a third of $14bn penalty for mis-selling scandal

Jill Treanor

30, Sep, 2016 @11:04 PM

Article image
Deutsche Bank starts cutting London jobs with 18,000 at risk worldwide
Some staff in London reported to be in tears after hearing their jobs have gone

Sean Farrell, Julia Kollewe and Edward Helmore

08, Jul, 2019 @11:39 AM

Article image
European banking shares dive amid threat of $14bn Deutsche Bank fine
German lender vows to fight penalty sum threatened by US Department of Justice as investors pile out of banking sector

Jill Treanor and Angela Monaghan

16, Sep, 2016 @8:47 AM

Article image
Deutsche Bank shares slide again after fresh speculation over US penalty
Negative sentiment knock 4% off the share price of Germany’s biggest bank in early trading on DAX

Jill Treanor

10, Oct, 2016 @10:00 AM