Things are not evolving in the right direction for Deutsche Bank, as the financial institution continues to make very intriguing decisions. Earlier this week, DB was forced to cut ties with as many as 3,400 clients in the trading business, which is never a good sign. All debt sales services to particular financial institutions and hedge funds were halted immediately.
Deutsche Bank Is Making Drastic Changes
Financial experts have been questioning the solvability of Deutsche Bank for quite some now. The institution is mostly known for their debt and equity sales, although those ventures have not always turned out well. In fact, the bank is now cutting ties with nearly 3,400 clients in those two markets, effective immediately.
This news was announced through an internal memo, which indicates that more changes are coming. Equity sales activities, execution of equities trading orders, and equity structuring have been halted, but only for some clients. This is rather intriguing, though the reason behind the selections is currently unknown.
It is true that Deutsche Bank needs a major restructuring process, and this seems to be part of the ongoing changes. Additionally, the bank is still being scrutinized by the US Justice Department over their multi-billion dollar fine related to mortgages. Hefty fines in a time of financial discrepancy only paint an even more troublesome future for the bank.
About a year ago, Deutsche Bank officials had made known their plans to reduce the number of clients in their Global Markets and Corporate & Investment Banking divisions by half in the coming years. Letting go 3,400 clients in these sectors is the first step towards achieving that goal, albeit the clients themselves will not be amused by this decision.
According to the bank, this plan will help Deutsche Bank get rid of relationships presenting unsatisfactory economic returns. That is not entirely surprising, as there is no point in keeping clients on board when they perform below expectations. Do bear in mind that DB receives nearly 80% of its income from one-third of their customer base.
Even though the institution has been going through some rough patches, DB remains in the top five of global trading houses in the debt market. They also rank in the top ten of equities, which makes letting go of 3,400 clients even more strange. Then again, the brass has a plan in mind, and they will continue to execute it as long as they can.
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