Germany's largest financial institution, Deutsche Bank, has entered a crucial phase in its 145 year history: presenting a €3.5 billion savings and re-organisation plan yesterday in Frankfurt.
The drastic turnaround plan, shutting down in markets abroad while shrinking its high-street presence at home, left markets unimpressed with shares down over 4 per cent in afternoon trading in Frankfurt.
But the corporate shakeup will be overshadowed when a court case opens today against co-chief executive Jürgen Fitschen. In a civil suit, he is accused of being economical with the truth to investigators in a long-running legal battle between the Frankfurt bank and Germany's defunct media company, Kirch.
Before that case opened Mr Fitschen and his co-executive Anshu Jain presented publicly their plans to cut costs and reduce the bank's high street presence by selling its Postbank subsidiary and shuttering 200 of its own 700 Deutsche Bank branches.
“We reaffirm our commitment to being a leading global bank based in Germany [but]we must...focus more sharply on mutually attractive client relationships,” they said.
Despite yesterday’s share price fall, which investors blamed on a lack of detail in the reform plan, shares in the bank have risen almost 40 per cent since first rumours last December about the sale of Postbank. The business, bought in 2008, allows German customers conduct their business activities in the local post office.
Yesterday the bank confirmed it would squeeze out remaining shareholders – around 3 per cent – and then refloat the company, though it was open to offers.
The Deutsche duo’s plan envisages a further €3.5 billion in cost cuts on top of existing planned savings of €4.5 billion, with investment of €1 billion in digital technology.
The bank lowered its targeted return on equity, a key profitability gauge, to at least 10 per cent by 2020.
On Sunday, the Frankfurt lender said legal costs had eaten into its first-quarter net profit, after agreeing to pay a $2.5 billion penalty for alleged benchmark interest rate manipulation.
Mr Jain, head of Deutsche’s investment wing when the alleged manipulations took place, said he took “full responsibility” for the scandal which had taken an “enormous toll” on the bank.
“The conduct of those people was reprehensible, and I was their leader,” said Mr Jain at a news conference in Frankfurt on Monday. “There’s no stepping back from that.”
But his hopes yesterday for a “smaller, leaner” future for Deutsche Bank could be complicated today by echoes from the institution’s recent past.
This morning Mr Fitschen and two predecessors at the bank will appear in a Munich court to be quizzed on their role during the 10-year legal battle over the 2002 bankruptcy of the Kirch group.
Kirch founder Leo Kirch claimed his struggling business was ruined when former Deutsche Bank chief Rolf Breuer claimed in a television interview that no one was interested in lending the group money. Kirch claimed Deutsche acted as it did in the hope of getting a slice of the sale of his company's assets.
Deutsche disputes these claims but, after years of legal wrangling, it agreed last year a €900 million settlement with the heirs to Mr Kirch, who died in 2011.
Today’s case will not look directly at the circumstances of the bankruptcy itself but the role played by Mr Fitschen in the subsequent investigations. He joined the bank board in 2011 and has been co-head since 2012. He is accused of working with bank colleagues to co-ordinate their testimony in previous court cases to play down the role of their bank in the Kirch group collapse.
Mr Fitschen insisted yesterday he had “neither lied nor deceived” in the Kirch investigation. I’ve said it from the beginning that I see no reason why these charges were filed against me,” he said.
