Deutsche-Bankers deal threatens 3,000 City jobs

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The Independent Online
THERE WERE fears yesterday that up to 3,000 jobs could go in the City after Deutsche Bank unveiled a $10bn merger with Bankers Trust of America to create the world's biggest bank.

Speaking at a news conference in Frankfurt to announce the deal, Deutsche Bank chief executive Rolf Breuer said that 5,500 staff will be cut, with the axe falling mainly in London and New York.

The jobs cull could be the biggest the City has seen, eclipsing the 2,500 jobs lost in the City following last year's merger between Union Bank of Switzerland and Swiss Bank Corporation - at the time the largest European banking merger ever seen.

The cuts which were far larger than staff had been led to expect will be spread evenly between global fixed income, global equity, domestic equity and support services, including IT and personnel. There will be no cuts in Germany.

Mr Breuer denied the bank was planning to favour staff at Deutsche which employs 6,000 in London over those at Bankers Trust, which has 2,500, many former NatWest Markets staff employed under the BT Alex Brown umbrella.

Deutsche said that it plans a one-off charge of $1.2bn to cover severance payments. In addition it will set aside $400m for golden handcuffs to lock in staff who they fear might walk. That raises the total cost of the acquisition for Deutsche to $11.7bn. The $10bn headline figure includes $600m to cover the cost of buying out Bakers Trust's executive option scheme.

Deutsche plans a 4bn German mark rights issue to fund the deal. The bank also says that it will raise unspecified amounts from the issue of bonds, convertible warrants, assets sales and the sale of warrants convertible into shares held by Deutsche Bank in other companies including DaimlerChrysler, the auto giant and Allianz the German insurer.

Dr Breuer said that the merger would lead to savings of $1bn a year from 2001. Return on equity would rise from 22.2 per cent now to at least 26 per cent in 2001.

The deal will create the largest bank in the world with a balance sheet of $834bn, $688bn of assets under management and 96,442 staff.

The deal fulfils Deutsche's longstanding ambition to acquire a sizeable presence in the US. But it falls short of achieving Deutsche's ultimate dream of breaking into the charmed circle of so-called bulge bracket banks which dominate Wall Street.

Bankers Trust has a strong corporate lending business and has a large presence in bonds and foreign exchange but it has been badly hit by the recent financial crisis and is still trying to put together a credible mergers and acquisitions advisory business out of a string of acquisitions, including NatWest markets in the UK and Alex Brown and Wolfensohn in the US. Analysts said that both banks have been dealing with weak hands. In the third quarter, when the emerging markets crisis was at its worst, Bankers slumped to a loss of $488m while Deutsche's investment banking business made just $41m.

Dr Breuer brushed aside the critics yesterday: "Bankers Trust was an excellent fit. It was our first and best choice."

However, senior Deutsche executives have made little secret of their hope that once this deal is integrated Deutsche will be in a strong position to make a further acquisition - this time of top tier firm like Morgan Stanley or Merrill Lynch.

Deutsche hope to complete the deal by May next year.