Deutsche Bank and HSBC set for further cost cuts amid COVID-19 challenges
26 May 2020 London
Image: alice-photo/Shutterstock
Banking giants HSBC and Deutsche Bank are said to be looking to further reduce costs with pay cuts for staff amid COVID-19 challenges and major restructuring plans.
This comes amid reports from the Financial Times (FT) that Deutsche Bank’s designated leaders have been asked if they want to take a voluntary pay cut.
In a statement, a Deutsche Bank spokesperson confirmed to AST: “As our restructuring plans progress, the management board and the group management committee have decided to lead by example and give a broader group of senior managers the opportunity to be part of this initiative. This is a voluntary measure in the entrepreneurial spirit and discipline with which we are running our company.”
The plan at Deutsche Bank, as of July last year, is to exit the equities sales and trading business, while retaining a focused equity capital markets operation, as part of a radical transformation.
According to the bank, this move would significantly downsize its investment bank with the aim to cut total costs by a quarter by 2022, as well as a workforce reduction of approximately 18,000 full-time equivalent employees to around 74,000 employees by 2022.
The global pandemic has not put a halt on such plans as the CEO Christian Sewing confirmed that the bank is continuing to rigorously implement the transformation programme and will have to reduce costs even further and implement job reductions as planned.
In a statement from Deutsche Bank’s annual general meeting, Sewing said: “The transformation will of course also impact on our senior managers. Their number will be also be reduced. We already have 13 percent fewer managing directors, the most senior level below the management board, than two years ago.”
Sewing commented: “But it’s precisely because the transformation is essential for the future of our bank and we bear responsibility for a sustainable business model that we will, unfortunately,
have to resume these personal discussions. This is always painful, and it is especially
painful at a time like this. However, it is especially in this environment that we have to
stick to our cost reduction programmes. In doing so we will do everything we can to make
the job cuts in as socially responsible a manner as possible.”
Meanwhile, the FT has also reported that HSBC’s board is set to ramp up its restructure after deciding that the COVID-19 crisis requires more drastic measures.
In April, HSBC indicated that its planned restructure – that could see a loss of 35,000 jobs by 2022 – would be delayed.
Speaking in April, HSBC's CEO Noel Quinn, said: “I take the well-being of our people extremely seriously. We have therefore paused the vast majority of redundancies related to the transformation we announced in February to reduce the uncertainty they are facing at this difficult time.”
This followed the announcement in March when the bank said it would combine its global markets and securities services (excluding issuer services) divisions as part of its restructure. The restructure was announced shortly after HSBC’s review of its 2019 financial performance results.
However, the FT reported that the board is now pressing executives to restart the restructuring and push for even bigger changes, including further cuts or even a possible sale of its US business alongside its retail network in France and operations in smaller non-strategic countries.
Senior figures at HSBC told the FT that some of the more marginal businesses that were previously given the benefit of the doubt are being re-examined.
One person familiar with the discussions stated to the FT that although the board wants a new strategic plan “sooner rather than later”, that it will be several months before the review is completed.
HSBC declined to comment.
This comes amid reports from the Financial Times (FT) that Deutsche Bank’s designated leaders have been asked if they want to take a voluntary pay cut.
In a statement, a Deutsche Bank spokesperson confirmed to AST: “As our restructuring plans progress, the management board and the group management committee have decided to lead by example and give a broader group of senior managers the opportunity to be part of this initiative. This is a voluntary measure in the entrepreneurial spirit and discipline with which we are running our company.”
The plan at Deutsche Bank, as of July last year, is to exit the equities sales and trading business, while retaining a focused equity capital markets operation, as part of a radical transformation.
According to the bank, this move would significantly downsize its investment bank with the aim to cut total costs by a quarter by 2022, as well as a workforce reduction of approximately 18,000 full-time equivalent employees to around 74,000 employees by 2022.
The global pandemic has not put a halt on such plans as the CEO Christian Sewing confirmed that the bank is continuing to rigorously implement the transformation programme and will have to reduce costs even further and implement job reductions as planned.
In a statement from Deutsche Bank’s annual general meeting, Sewing said: “The transformation will of course also impact on our senior managers. Their number will be also be reduced. We already have 13 percent fewer managing directors, the most senior level below the management board, than two years ago.”
Sewing commented: “But it’s precisely because the transformation is essential for the future of our bank and we bear responsibility for a sustainable business model that we will, unfortunately,
have to resume these personal discussions. This is always painful, and it is especially
painful at a time like this. However, it is especially in this environment that we have to
stick to our cost reduction programmes. In doing so we will do everything we can to make
the job cuts in as socially responsible a manner as possible.”
Meanwhile, the FT has also reported that HSBC’s board is set to ramp up its restructure after deciding that the COVID-19 crisis requires more drastic measures.
In April, HSBC indicated that its planned restructure – that could see a loss of 35,000 jobs by 2022 – would be delayed.
Speaking in April, HSBC's CEO Noel Quinn, said: “I take the well-being of our people extremely seriously. We have therefore paused the vast majority of redundancies related to the transformation we announced in February to reduce the uncertainty they are facing at this difficult time.”
This followed the announcement in March when the bank said it would combine its global markets and securities services (excluding issuer services) divisions as part of its restructure. The restructure was announced shortly after HSBC’s review of its 2019 financial performance results.
However, the FT reported that the board is now pressing executives to restart the restructuring and push for even bigger changes, including further cuts or even a possible sale of its US business alongside its retail network in France and operations in smaller non-strategic countries.
Senior figures at HSBC told the FT that some of the more marginal businesses that were previously given the benefit of the doubt are being re-examined.
One person familiar with the discussions stated to the FT that although the board wants a new strategic plan “sooner rather than later”, that it will be several months before the review is completed.
HSBC declined to comment.
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