Cryan sees tech bringing lender into line with peers at ‘half’ its 97,000 headcount
Author: Laura Noonan, Patrick Jenkins and Olaf Storbeck
Posted on: Financial Times | October 8th, 2017
The chief executive of Deutsche Bank has given his clearest hint yet that his bank could cut tens of thousands more jobs as it turns to technology to bring costs into line with sharply lower revenues.
“We employ 97,000 people,” John Cryan told the Financial Times. “Most big peers have more like half that number.”
Deutsche has made about 4,000 of the 9,000 job cuts promised under a five-year restructuring plan announced in late 2015. MrCryan said many of the additional cuts would come through using technology to boost efficiency in the bank’s processes.
“There we’ve got the most to gain,” he said. “We’re too manual, which can make you error-prone and it makes you inefficient. There’s a lot of machine learning and mechanisation that we can do.”
MrCryan said the ratio of front office, revenue-generating staff, to back office people who keep the bank’s systems running, was “out of kilter” at Deutsche.
While Jes Staley, Barclays’ new chief executive, tackled the high cost base he inherited with a hiring freeze, MrCryan described Deutsche as having a “hiring frost”.
Once the world’s biggest investment bank, Deutsche’s star has been on the wane for years as post-crisis regulation made the bank’s mighty fixed income business less profitable and big misconduct fines and high legacy costs hit the bottom line.
Despite a vow to cut €3bn from its cost base under Strategy 2020, the German lender made a return on tangible equity of 4 per cent for the third quarter of this year, far short of its medium-term 10 per cent target.
MrCryan, who has raised €8bn of capital since he took over Deutsche in mid-2015 and has settled many of the bank’s most painful litigation issues, has come under fire from investors over Deutsche’s poor operating performance. The bank’s share price has almost halved under his tenure.
Critics have questioned his blunt messaging, which they say has demotivated staff, contributing to key departures and a decline in revenue. At a conference in September, he said the bank’s accountants “spend a lot of the time basically being an abacus” and were ripe for being automated.
The plain-speaking Briton told the FT there was “an easy” opportunity to save money by collaborating with rivals in the area of crime prevention and detection. “Every bank at the moment has a huge and burgeoning department of people who are doing the same stuff. It’s not a source of competitive advantage and you’re exposed to making your own mistakes.” Last month, Deutsche promised savings of €900m from integrating its retail network with that of Postbank, its German retail banking subsidiary, which it originally planned to spin off but decided this year to keep. The cuts will take three to four years for Deutsche to fully realise. MrCryan said there was a lot of scope to close branches, suggesting many Postbank customers could be shifted online. “The truth is if I went to a load of branches, I’d wait quite a lot of the day before I encountered [any] customers. They just don’t come in as often as they used to.”