(Bloomberg) -- Chancellor Angela Merkel’s government will look past Deutsche Bank AG’s cutting a fifth of its workforce as the German lender commits to an overhaul.
Chief Executive Officer Christian Sewing’s bid to reboot the bank is viewed in Berlin as a necessary change, according to an official with direct knowledge of the issue who asked not to be named. Despite the headline 18,000 job cuts, normally a red flag for politicians, the Frankfurt-based lender’s makeover is seen as necessary to cut fat and boost the bank’s profitability. In addition, the government welcomes a step back from investment banking and a renewed focus on German businesses.
Deutsche Bank’s failure in April to combine with Commerzbank AG, in which the government has a stake of about 15.5%, was a stinging defeat for Finance Minister Olaf Scholz, whose bid to rescue a potential national champion got little public support from across the political spectrum.
That left Deutsche Bank to its own devices and Sewing on Sunday pledged to do what many in Germany’s political ranks have always called on it to do: drop its ambitions as a global investment bank and return to its German-lending roots.
Olav Gutting, a lawmaker for Merkel’s Christian Democratic Union who sits on the finance committee of the lower house of parliament, called the overhaul “bold” given a challenging business environment in which lending money is hardly profitable any more.
“This is very ambitious,” Gutting, who in the past has ruled out any form of state involvement in helping Deutsche Bank, said in a message, adding that job cuts naturally concerned politicians. “But I’m crossing my fingers, because we need a Deutsche Bank present globally.”
A spokesman at Germany’s Finance Ministry declined to comment on the overhaul plans.
Markets have had a mixed view on the overhaul for a bank viewed by German regulators as systemically relevant, with risk gauges falling and its euro convertible bonds climbing. Deutsche Bank shares fell 1.7% in afternoon trading after seesawing in the morning.
(Updates with CDU lawmaker comments in fifth, sixth paragraphs.)
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