Deutsche Bank is poised to significantly scale back operations in consumer lending, private mortgage financing and trade finance as part of a broader strategy to enhance profitability and appease shareholders. In an interview with “Handelsblatt”, CEO Christian Sewing acknowledged that certain divisions are “overdimensioned” relative to their value contribution, signaling a shift in resource allocation focused on higher-yield activities.
The planned retrenchment isn’t a complete exit, but rather a strategic reduction. While consumer and private mortgage financing will remain offerings, Sewing indicated a considerably smaller footprint in these areas. Similarly, trade finance, a cornerstone of Deutsche Bank’s global business, is earmarked for optimization, with the bank’s current volume considered disproportionately large compared to its international peers. This move raises questions about Deutsche Bank’s commitment to serving smaller businesses and potentially impacting Germany’s export-dependent economy. Critics argue that aggressive cost-cutting and a narrowing of services could exacerbate existing vulnerabilities within the German Mittelstand.
Central to this adjustment is a proposed overhaul of the bank’s compensation structure, with a much stronger emphasis on “shareholder value added” (SVA). Sewing explicitly stated the intention to link employee remuneration to the bank’s ability to boost returns for investors, a move that directly supports the intention to raise the dividend payout ratio from 50% to 60%. This pivot towards an SVA-driven compensation system has drawn immediate criticism, with labor representatives expressing concern that it could incentivize excessive risk-taking and prioritize short-term gains at the expense of long-term stability and employee morale.
The announcement underscores a growing tension between the pressure to deliver immediate shareholder returns and the bank’s responsibilities as a systemically important institution in Germany. Some analysts question whether a relentless focus on SVA, coupled with strategic downsizing, will ultimately address the fundamental challenges facing Deutsche Bank, including legacy legal liabilities and the need for sustained investment in innovation and digital transformation. The move also potentially signals a weakening of the bank’s role in supporting key sectors of the German economy and raises broader concerns about the evolving landscape of German financial services.
