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Deutsche Bank

Deutsche Bank may pull back on US operations as part of settlement

Reports in German media have suggested Deutsche Bank may scale back its US operations as part of a multibillion-dollar settlement over a probe into its residential mortgage-backed securities.

Newspaper "Die Welt am Sonntag" reported over the weekend that Deutsche Bank may be forced to reduce its US activities as part of a deal with the US Department of Justice. 

Germany's biggest bank said last month that the US Justice Department had requested $14 billion (12.76 billion euros) to settle a probe tied to residential mortgage-backed securities. The bank was reported to have put aside 5.5 billion euros ($6 billion) for litigation at the end of June.

"Die Welt" said that radical changes to the business model were typical requirements in settlement arrangements with the US government, reporting Deutsche Bank "must clarify one or two things" before an agreement could be made.

Under US regulatory requirements, a certain amount of capital would have to be dedicated to funding the bank's US business. Reducing the size of the business would be one way to reduce the capital needs, if the settlement with the Department of Justice should exceed the amount the bank has put aside for legal disputes.

Resizing operations

Deutsche Bank had 10,842 employees in North America at the end of 2015. That represents about 10 percent of its 101,104-strong, worldwide workforce.

In a message to divisional chief operating officers last week, Deutsche Bank said hiring would be put on hold with immediate effect. Last year it announced cuts of 9,000 jobs, including 4,000 positions in its home market.

Chief Financial Officer Marcus Schenck reportedly told staff representatives last month that the lender may need to cut an additional 10,000 jobs to lower costs. A further 6,000 external contractor positions are also reported to be at risk.

The "Sueddeutsche Zeitung" reported that the bank was considering pulling even more operations out of the United States.

There was no comment from Deutsche Bank in response to the weekend reports.

The company has lost about 46 percent of its market value this year, making it the fourth-worst performer on the Bloomberg Europe Banks and Financial Services Index.

jm/cmk (Reuters, dpa)