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(Bloomberg) -- Deutsche Bank AG said it plans to reduce management roles and cut headcount over coming years, after higher-than-expected costs marred its results in the final months of last year.
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Expenses rose 14% from a year ago, overshadowing a better-than-expected performance in the investment bank, where fixed-income traders record their best fourth quarter on record.
“Our clear ambition is to operate the bank with a lower headcount, and we aim to run a much leaner platform,” Chief Executive Officer Christian Sewing said in prepared remarks Thursday.
In the role for almost seven years, Sewing is balancing cost controls with investments in growth as he works to return more than €8 billion to shareholders over the medium term. He has built up parts of the investment bank in recent years, seeking to hire talent as a lull in dealmaking prompted rivals to cut back.
Deutsche Bank said on Thursday that “additional investments” mean it won’t reach an initial target of keeping costs below 62.5% of income this year. Instead, it is now aiming for a ratio of below 65%.
Shares of the lender fell as much as 6.3% and traded 4.2% lower at 10:56 a.m. in Frankfurt. That reduced gains over the past 12 months to 55%.
“Deutsche Bank reported an underwhelming set of results,” analysts Thomas Hallett and Andrew Stimpson at KBW wrote in a note, adding that costs were “more than offsetting a slight revenue beat.”
Leaders of Deutsche Bank’s various businesses are now being given more control over their cost base to help tackle inefficiencies. At the same time, the bank will “actively reduce management layers and roles, and integrate teams,” Sewing said. In particular, scrutiny will be on “areas where we do not see the required efficiency improvements.”
Sewing also said he may consider cutting underperforming units to improve profitability beyond 2025. The comments are the clearest indication yet how the CEO, 54, plans to position the lender as he prepares to unveil a new strategic plan later this year.
Improving efficiency is key for Sewing as he seeks to boost returns to investors and lift the share price. Deutsche Bank said its plans €2.1 billion in capital distributions this year, including €1.3 billion in dividends and €750 million in share buybacks for which it has already received regulatory approval.