Inside Deutsche Bank's demoralized (or not) U.S. business

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Deutsche Bank U.S. business

In the past few weeks, Deutsche Bank's U.S. restructuring has gone from a pinprick (400 out of 10,000 people) to a flesh wound (a predicted 1,000+ job cuts in the U.S.), to something altogether more menacing (7,000 cuts in total, including the elimination of 25% of all jobs in equities), with the U.S. bearing the brunt of the blow. So...how are things at Deutsche's Wall Street office right now?

This depends upon who you ask.

"Morale has completely collapsed," declares one U.S. equity derivatives trader, speaking on condition of anonymity. "There have been attempts to turn this business around ever since Anshu's time and nothing worked. No one believes things can improve and the fear is that clients will stop trading with us."

This is the bleak end of the spectrum. Some of the bank's U.S. equity derivatives professionals complain they're on the front line of the cuts.

Insiders say the U.S. delta one desk has been particularly affected, but that there have been layoffs across equity derivatives sales, trading and structuring too. "I know of at least six people above VP level who've been let go from our group of around 50 and there are plenty more," says the trader.  Danielle Russo, a highly capable VP in equity swaps trading is understood to be among the surprise departures, which new CEO Christian Sewing alluded to yesterday when he said the European equity derivatives business will be Deutsche's "global hub" from now on. 

Deutsche's U.S. prime finance business has been trimmed too. Insiders say Jim Kane, a director in client transition management, has left after 11 years at DB and a career that began at Lehman Brothers in 1995.

Deutsche Bank isn't commenting on the exits, or the mood at its U.S. business. Away from equities trading and prime finance, however, things appear much more upbeat. "The platform is still functioning exactly as before," says one senior equity capital markets banker, also speaking on condition of anonymity. "There's nothing dramatic happening here - we're just cutting some of the fat, finally."

He's not the only one to embrace the new strategy. Mark Fedorcik, the newly-promoted co-head of Deutsche Bank's U.S. operation, said last month that Deutsche's Wall Street employees should relish the elimination of under-performers in their midst. “People want to be focused, they want to see the bottom performers taken out," Fedorcik declared. Several DB insiders echo this sentiment: "Sure there have been involuntary reductions, but we're still top-heavy," says one, adding that: "DB can run a much leaner business by streamlining processes and investing in IT - and given management's focus on increasing the pnl (and therefore bonus pool per person), this should boost morale."

Sewing said yesterday that the bank intends to make its front office job cuts by July 2018. However, some of DB's senior U.S. employees insist that the extent of the layoffs is being exaggerated and includes natural attrition. "All that's happening here is that under-performers are being let go at a slightly higher rate than usual and that we're moving people internally rather than hiring externally when people leave," says one U.S. equities MD. "We're not pulling out of any equities product areas, it's nothing earth-shattering, although there are some worries around the reduced prime balance sheet."

In Sewing's presentation yesterday, he suggested that Deutsche could even recruit for its U.S. business in the months to come: the presentation said the bank plans to, 'selectively invest' in the U.S. credit franchise. Fedorcik said previously that the bank will be hiring, "here and there," in the U.S this year.

Nonetheless, there remains a danger that Deutsche will lose key people to uncertainty. Several senior U.S. bankers stepped down ahead of Sewing's announcement (possibly after reading the writing on the wall). In Europe, there are unconfirmed reports that Taras Bondar, the co-head of equities algo quants at the bank has quit of his own accord, despite this being a key area of strategic focus. "25% is a lot of people to let go," says one trader. "It's sending a very bad signal to the market and to our clients."

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