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Deutsche Bank Scraps Plans of a New Digital Bank in US
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Frankfurt-based German lender Deutsche Bank AG’s (DB - Free Report) Chief Executive Officer John Cryan has discarded plans to open a new digital bank in the U.S. on concerns that the project would divert resources from the bank’s core strategy of focusing on the innovation of its offerings and upgrading infrastructure.
The project was headed by Henry Ritchotte who along with his team produced an “excellent blueprint” for the new bank. However, Deutsche Bank will accommodate Ritchotte and his team in the current business.
Notably, Ritchotte resigned from the German lender’s management board at the end of 2015 and was engaged in the work of the digital bank. Deutsche Bank is “determined to implement several ideas generated” by his team in the lender’s business divisions, Cryan said without elaborating. The lender has planned investments of up to €1 billion ($1.14 billion) on digital initiatives over the next five years.
In Oct 2015, Deutsche Bank’s Supervisory Board unveiled restructuring plans. The move followed the bank’s Strategy 2020 revealed in April, which intended to change the bank’s operating model to achieve higher efficiency, reduction in complexity, better resilience and resolvability.
Notably, the bank aims to achieve annual gross savings of €3.5 billion by 2020. Of these, around 60% by efficiency improvement are targeted to realize through digitization, infrastructure adjustments and other measures. The remaining 40% is expected to be realized from streamlining operations through offloading of unprofitable businesses, focusing on geographic footprint and branch closures.
However, cost-cutting efforts were thwarted by trading revenue slump in the initial months of 2016. Notably, the discarding of the digital bank plan followed the delay in the planned initial public offering of the Postbank retail unit.
Cryan is expediting efforts to revamp the bank. In a memo released on Jul 1, Cryan emphasized on the need to simplify the bank’s business model, reduce costs and trim unprofitable businesses. We believe that the gradual execution of the restructuring moves should support the growth prospects of the company.
While the new CEO of Deutsche Bank looks proactive, it is difficult to gauge the extent of improvement the bank will witness under his leadership, given the current headwinds it is facing. As the European economy is yet to stabilize, we don’t foresee any significant favorable change in the company's performance in the near term.
Deutsche Bank currently carries a Zacks Rank #5 (Strong Sell). Better-ranked foreign banks include Bank of Montreal BMO, Shinhan Financial Group Company Ltd. SHG and Canadian Imperial Bank of Commerce CM. All three stocks sport a Zacks Rank #1 (Strong Buy).
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Deutsche Bank Scraps Plans of a New Digital Bank in US
Frankfurt-based German lender Deutsche Bank AG’s (DB - Free Report) Chief Executive Officer John Cryan has discarded plans to open a new digital bank in the U.S. on concerns that the project would divert resources from the bank’s core strategy of focusing on the innovation of its offerings and upgrading infrastructure.
The project was headed by Henry Ritchotte who along with his team produced an “excellent blueprint” for the new bank. However, Deutsche Bank will accommodate Ritchotte and his team in the current business.
Notably, Ritchotte resigned from the German lender’s management board at the end of 2015 and was engaged in the work of the digital bank. Deutsche Bank is “determined to implement several ideas generated” by his team in the lender’s business divisions, Cryan said without elaborating. The lender has planned investments of up to €1 billion ($1.14 billion) on digital initiatives over the next five years.
In Oct 2015, Deutsche Bank’s Supervisory Board unveiled restructuring plans. The move followed the bank’s Strategy 2020 revealed in April, which intended to change the bank’s operating model to achieve higher efficiency, reduction in complexity, better resilience and resolvability.
Notably, the bank aims to achieve annual gross savings of €3.5 billion by 2020. Of these, around 60% by efficiency improvement are targeted to realize through digitization, infrastructure adjustments and other measures. The remaining 40% is expected to be realized from streamlining operations through offloading of unprofitable businesses, focusing on geographic footprint and branch closures.
However, cost-cutting efforts were thwarted by trading revenue slump in the initial months of 2016. Notably, the discarding of the digital bank plan followed the delay in the planned initial public offering of the Postbank retail unit.
Cryan is expediting efforts to revamp the bank. In a memo released on Jul 1, Cryan emphasized on the need to simplify the bank’s business model, reduce costs and trim unprofitable businesses. We believe that the gradual execution of the restructuring moves should support the growth prospects of the company.
While the new CEO of Deutsche Bank looks proactive, it is difficult to gauge the extent of improvement the bank will witness under his leadership, given the current headwinds it is facing. As the European economy is yet to stabilize, we don’t foresee any significant favorable change in the company's performance in the near term.
Deutsche Bank currently carries a Zacks Rank #5 (Strong Sell). Better-ranked foreign banks include Bank of Montreal BMO, Shinhan Financial Group Company Ltd. SHG and Canadian Imperial Bank of Commerce CM. All three stocks sport a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>