Share prices for the investment and financial services company Deutsche Bank continue its tumble as investors express doubts over its planned business overhaul.
The move, instigated by its relatively new chief executive, is aimed at reviving the company and getting it back to its roots of being Germany's go-to bank.
Despite the announced reasoning behind the planned overhaul, investors and shareholders are still hesitant to get on board with the plan. For this reason, the bank's CEO Christian Sewing, who took the helm just a year ago, is embarking on a week-long roadshow to meet with stakeholders to properly explain the company's restructuring plans.
According to reports citing sources close to the matter, Sewing is apparently very committed to the company's restructuring plan that he has pledged to give a quarter of his fixed annual salary, or around $920,000, to aid in the effort.
When reports of the company's overhaul were made public over the weekend, stock prices immediately fell by as much as 10 percent. Reports that the company would be cutting more than 18,000 jobs did not sit well with investors. Deutsche Bank began cutting jobs in its trading business earlier in the week, with hundreds of staff members from cities such as Sydney, London, and New York sent out of their offices.
The cost of the restructuring, estimated to be around $8.3 billion, also didn't help in bolstering investor confidence. The drop in the company's stocks was the biggest two-day decline ever seen in nearly three years. Prices continued to plummet over the week, dropping as much as an additional 6.5 percent.
The company's capital instruments also saw significant drops earlier in the week, with its US dollar Additional Tier 1 (AT1) perpetual instrument dropping by 2.4 cents on the dollar.
Some analysts have mentioned that Sewing's plans to cut down on operational costs is sound and will likely benefit its bottom line. However, some have expressed concerns on whether or not Sewing would be able to pull off his plan given the current state of interest rates and the German market. Sewing apparently needs to pull off a difficult balancing act of retaining the bank's revenues while it cuts on its operational costs.
Sewing reportedly wants Deutsche Bank to focus more on its more profitable businesses, including corporate banking and asset and wealth management. The bank will apparently be reducing or closing some of its more risky businesses, such as investment, trading, and securities. While this may sound like a good plan, competition in corporate banking and asset and wealth management is getting harder.
