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Morning Coffee: Fixed income fear at Deutsche Bank despite strategy delay

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Deutsche Bank’s new CEO John Cryan has delayed implementing its new strategy until late October, but this is unlikely to provide a lifeline to its employees. Deutsche doesn’t have the “luxury” of remaining in all areas of fixed income and costs remain too high, he said.

Despite the postponement, Cryan said the German bank “remained committed” to the previously announced overall strategy.

“We have allowed ourselves to become too inefficient,” Cryan explained in a new letter to employees. “Our cost base is swollen by poor and ineffective processes, antiquated and inadequate technology, too many tasks being completed using manual labour, and, too frequently, unsuccessful investments in our infrastructure.”

“Where we encounter marginal business opportunities or businesses with poor prospects or business lines that are not controlled to the standards we demand, we will exit them, even if this means closing them down,” he added.

Overall, Cryan is concerned that some bank operations are too diverse and complex, and the bank does not have “to be all things to all people.”

Among the steps in the strategy that were reported earlier this year are cutting assets at the investment bank and lowering costs. The Postbank consumer banking unit is likely to be sold by the bank, as well.

It is still not completely clear what the new strategy will mean for jobs at Deutsche’s corporate and investment bank. But one estimate suggested bank-wide if Deutsche Bank cuts €3.5 billion ($3.9 billion) in costs that could mean cutting 12,000 jobs.

Under the previous schedule, layoffs were supposed to start in August 2015.

On the brighter side, the plan meant compliance staff would keep their jobs, as will equities staff. More equity capital market staff were expected to be hired in North America, too. But for those who work for Deutsche Bank’s corporate and investment bank, it may be bad news, as we reported earlier this year.

On the other hand, Deutsche is expected to see growth in: corporate finance; cash equities; equity derivatives; and emerging markets debt, the report adds. Also, in Q1, Deutsche’s total headcount in the corporate banking and securities business rose by 1,035 people. However, headcount in the front office dropped by 177 employees.

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