Deutsche Bank announced plans to axe almost 10 per cent of its 65,000-strong global workforce, as part of an ambitious cost-cutting drive aimed at increasing profits by 20 per cent in 2005.
The German financial services giant is set to cut 6,400 jobs, of which at least 1,000 are expected to be in the UK. But about 1,200 of the lost jobs will be outsourced to countries with cheaper labour.
Announcing a smaller-than-expected fall in fourth quarter profits yesterday, Josef Ackermann, the group chief executive, said the job cuts were part of "business realignment programme" for the coming year. He said expenses from the cost-cutting exercise could be as high as €1.3bn (£900m). However, the move is expected to generate annual cost savings of €1.1bn.
The bank was not specific about the exact location of the job cuts, other than to say about 2,000 would be in Germany. The remainder, it said, would be mostly from its IT and infrastructure divisions in its offices around the world. Deutsche Bank has 8,000 employees in the UK.
Speaking at a press conference, Mr Ackermann said that the group may consider selling the UK institutional fund management business, which has performed poorly over the past year, haemorrhaging many of its most valuable mandates.
Redemptions across the business doubled to €20bn in the final quarter of last year, as the company lost business from the likes of major clients such as the Railways Pension Scheme and Prudential.
"We will try to fix it," Mr Ackermann said. "If we can't fix it, we'd consider selling it, but only for a reasonable price."
Pre-tax profits for the fourth quarter were €269m, a 60 per cent fall on the previous quarter but almost 50 per cent better than analysts had expected. The bank also announced a 13 per cent rise in the dividend from €1.50 to €1.70 a share.
Commenting on the results, Mr Ackermann said: "Deutsche Bank delivered continued growth in profitability, driven by a record year in debt sales and trading, solid growth in advisory and origination, and by reaching our ambitious profit target of €1bn underlying pre-tax profit in private and business clients. We also made continued good progress in credit risk management, leading to further reductions in problem loans and provisions for credit losses.
"Our recommended dividend increase demonstrates our desire to see shareholders benefit from our profit growth. The investments we have made in our core businesses, together with our planned cost savings, underline our firm commitment to deliver on our financial targets."
Shares in the company closed up more than 1.2 per cent at €66.91 yesterday, , giving the group a market value of €36.4bn. However, some investors and analysts were disappointed that Deutsche Bank still lacked a clear strategy.
"The market will see the news of the job savings as positive," said Dieter Ewald, a fund manager for Frankfurt Trust. "What is missing today, and what has been missing for a very long time, is an answer to the question how the bank will increase revenues."
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