Deutsche Bank Restructures: What Does It Mean For Its Banking Operations?

Deutsche Bank (DB)has announced that is going through a restructuring of its banking operations. The company said it will be exiting its equities sales and trading business while making significant reductions to its corporate and investment banking assets. Deutsche Bank will, however, maintain its equity capital markets business.

Through the restructuring process, Deutsche Bank will also resize its fixed-income operations, including its rates business. It will also work to “wind-down” its existing non-strategic portfolio and reduce its “risk weighted” assets by approximately 40 percent.

New to the company will be a capital release unit that will manage the “wind-down” of its assets that it is reducing or exiting from. According to Deutsche Bank, the assets businesses represent €74 billion ($84 billion) and €288 billion ($322 billion) of “leverage exposure,” since Dec. 31, 2018.

By reducing its operations and restructuring its banking business, Deutsche Bank said it is focusing its efforts on the corporate banking, financing, foreign exchange, origination and advisory, private banking and asset management parts of its business.

Deutsche Bank also said it will implement a cost reduction program that will help it to reduce its expenses by €17 billion ($19 billion) by 2022, down 70 percent in that year.

The restructuring will include deferred tax asset write-down of approximately €2 billion ($2 billion) as well as impairments the company will claim of approximately €0.9 billion ($1 billion). It also anticipates cumulative charges of €7.4 billion ($8 billion) by the end of 2022.

Deutsche Bank said additional restructuring changes are expected to take effect in the second half of 2019 as well as in subsequent years.

The company said it will refund the restructuring process from existing resources without the need for additional capital. Additionally, the management board of the company has recommended to common equity dividends to be paid in 2019 and 2020.

Deutsche Bank also expects to report a Q2 loss of approximately €500 million ($560 million) and a net loss of €2.8 billion ($3 billion). It second-quarter income before taxes is anticipated to be €400 million ($448 million) with a net profit of €120 million ($134 million).

Shares of Deutsche Bank were down 4.96 percent as of 10:50 a.m. ET on Monday.