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(Bloomberg) -- Deutsche Bank AG Chief Executive Officer Christian Sewing said the next steps in his strategic plan for the lender may involve cutting underperforming units to improve profitability.
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Sewing, who is reviewing the bank in preparation for his next strategy update, told reporters on Thursday that he may “intervene even more rigorously where we are putting resources into business areas that generate below-average returns.”
“We will examine whether we should redistribute parts of the capital invested or even give up one or the other area to use our capital better elsewhere,” he said.
The comments are the clearest indication yet how Sewing, 54, plans to boost profitability beyond the current year. Deutsche Bank on Tuesday reiterated its revenue, profitability and payout targets under its current strategic plan, which runs through this year, but disappointed investors with a worsening cost guidance.
Shares of the lender fell as much as 6.3% in Frankfurt trading.
“We’re looking at all our business units to uplift them,” Chief Financial Officer James von Moltke said at the press conference. Closing business units is only one option, he said, with significant risk transfers another possibility to better allocate capital.
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Sewing highlighted mortgages and “middle-market lending” in Deutsche Bank’s home market as areas of insufficient profitability.
“The real challenge which we are working on is in retail Germany,” he said, adding that “one of the largest cost takeouts also in absolute numbers is next year again in the Private Bank in Germany.”
Sewing, who has turned around Deutsche Bank since taking took over almost seven years ago, said he would unveil his new strategy later this year. In the first major restructuring of his tenure a little over a year into his job, he announced some 18,000 job cuts — a target he later scrapped — and shuttered the equities trading unit.
The new strategy will also rely on job cuts to lower costs and is likely to include an improved profitability target, Sewing indicated.
“We are determined to make this bank more efficient, and that means changing how we do things,” Sewing said in remarks prepared for a call with analysts. “It starts with a simpler organizational setup and a smaller workforce.”