Deutsche Bank has begun an 8.3-billion-dollar downsizing that will include 18,000 job cuts by the year 2022.
People were seen leaving the investment bank’s headquarters in London on July 8, carrying boxes of items.
After decades of struggle, the volatile investment banking division that employs around 38,000 people, announced on July 7 it is removing its global equities sales and trading operations, and slimming down its fixed-income investments division, in an effort to restore consistent profitability and provide better returns to shareholders.
“I think the prospects are still not good because even if they cut costs, can they cut them fast enough to meet whatever losses they might face in their existing assets,” said James Nolt, Adjunct Associate Professor at New York University. “The problem is they have such a thin capital base that even a couple percent losses on their assets outstanding could wipe out their capital.”
When complete, the job cuts will reduce the workforce of almost 91,500 staff around the world to 74,000.
“If the global economy slows down, and there are many signs that it is slowing down,” said Nolt. “They’re probably the most exposed of the major banks.
The bank did not say where the cuts would take place but many of its investment banking activities are carried out in New York and London.
“I’ve been expecting for a while that they would be kind of like the canary in the coal mine for a global recession because they’re the most exposed and most over-leveraged and over-extended,” said Nolt.
The United States had been seen as a likely focus of the cuts with some shareholders pushing for a full U.S. retreat.
Deutsche Bank said it remains committed to the United States, its second-biggest market.
Reuters contributed to this report.