The gossip inside the Beverly Hills Hilton kept taking an unexpected turn -- toward, of all things, Deutsche Bank AG.
In chandeliered conference rooms and marble-floored hallways, Wall Street A-listers chatted, with no shortage of schadenfreude, about the German bank’s recent capitulation: After two decades trying to build one of the world’s top investment banks, it’s settling for something less -- and may eliminate thousands of jobs, especially in the U.S.
The main questions for many of its rivals attending the Milken Institute Global Conference: Can Deutsche Bank protect the U.S. businesses it wants to keep? And if not, who’s worth poaching?
Back inside the firm’s U.S. headquarters in Manhattan, that prospect is now weighing on Deutsche Bank executives who concede that a drumbeat of bad news, and potential for more, is taking a toll on morale. Several, speaking on the condition they not be identified, said they worry staff will start to defect to rivals -- or, worse, that big clients might do that themselves.
In the weeks since Deutsche Bank outlined its fourth global turnaround plan in three years, a picture is emerging of mounting uncertainties within the U.S. operations as executives make decisions on firings. The company’s April 26 announcement that it will probably shrink global equities trading, and in America scale back rates and corporate financing businesses, should’ve provided staff some clarity. But in the days since, many are realizing those are just the biggest of many changes afoot.
Targeting Underperformers
Employees who remain should feel encouraged by the overhaul, which in many areas will focus on underperformers, said Mark Fedorcik, co-head of the investment bank’s operations in the Americas, in an interview on Thursday. “You’ve got to make decisions to shrink where you’re not efficient.”
Yet as if to underscore the sweep of what’s happening, the bank announced late last week that it plans to abandon its U.S. headquarters on Wall Street for smaller digs in midtown Manhattan. Days later, people close to the firm said job cuts may be expanded to affect about 20 percent of the U.S. workforce. And despite the firm’s guidance on where it will shrink most, other desks may still be surprised by incremental cuts as the bank unwinds some past efforts to build.
The U.S. division, for example, will probably end up firing some of the dealmakers it lured with multimillion-dollar compensation packages in recent years, according to executives, who, like others inside Deutsche Bank, spoke on the condition of anonymity to avoid jeopardizing their careers.
Already last week, the bank told staff it would close its Houston office. Not even four years ago, it made a big investment in that business, poaching a team of oil and gas bankers from Citigroup Inc. One senior executive emphasized that the bank still views its presence in New York, San Francisco and Chicago as indispensable for its corporate finance units.
Chief Executive Officer Christian Sewing, who took the helm in April, flew to New York early this month to bolster morale and dispel rumors swirling within the bank about a wholesale withdrawal from the Americas. Over three days, he addressed staff, consulted with business heads, greeted investors and hosted a select group of clients for dinner at a restaurant in Midtown.