Deutsche outlines Postbank integration cost savings

The integration of Postbank into Deutsche Bank’s operations is expected to save the combined group €500m – a significant amount, but small in comparison to the €3bn of total savings the board of Germany’s largest bank has identified.

The total savings, measured in comparison to the noninterest expenses run-rate for the first half of 2012, will come also from retrenchments outside Germany, and mainly in corporate banking and securities. In total 1900 people will be affected in a headcount reduction expected to cut €350m from expenditure.

Those remaining with the bank could be in for a pay cut, as the bank said today it was “reviewing its compensation practices, in order to address both the absolute level of compensation and the relative balance between rewards for shareholders and those for employees”.

The bank pointed to strong inflows into private wealth management last quarter, offset by redemptions from its asset management businesses.

Jürgen Fitschen and Anshu Jain, co-chairmen of the management board and the group executive committee, said: “In the second quarter, the Bank’s performance was impacted by a volatile environment. The European sovereign debt crisis continues to weigh on investor confidence and client activity across the bank.”

Their company announced second quarter net income of €661m, and net revenues of €8bn. The bank has a Core Tier 1 ratio of 10.2%.

The bank is aiming to cut costs internally instead of diluting shareholders by equity issues, which it said would be considered only after “applying all capital levers at its disposal”.

In a nod to the troubles engulfing the banking industry more generally, Deutsche added it was “reviewing its codes of personal conduct to ensure that they are in line with its long tradition of doing business to the highest standards”.

Deutsche said it had identified €29bn of additional risk-weighted asset reductions and capital building measures, beyond those it had already announced. Because of this the bank expects to have a Core Tier 1 ratio of 9% at the start of next year.

“The Bank further aims to continue to grow this ratio through the rest of 2013 and beyond,” it said today.

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