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Deutsche Bank's London employees had better get ready for job cuts. Josef Ackermann, chief executive, has not yet concluded his review of operations. But yesterday's third-quarter results do not avert the need for cost savings. If anything, they put renewed pressure on quick action to cut costs. Without them, Mr Ackermann's target of a 25 per cent return on equity for next year looks as elusive as ever.

With the fixed income business a thorn in the side of some of Deutsche Bank's US counterparts, it is a relief that the bank continues to excel in this area. In contrast, investment banking and equities trading still look rough. DB Advisers, the bank's proprietary trading division has, along with Deutsche Bank's hedge fund clients, been hit by poor market conditions in equities and convertibles. The cash equity business has also suffered. The market has dismissed Deutsche Bank's 25 per cent target and instead pencilled in a return of 19 per cent.

But Deutsche Bank itself is not dropping the target. One reason is its potential to slash costs. Once salaries and bonuses are excluded, the bank has some of the industry's highest cost levels. Sure enough, it confirmed on Friday that cost-cutting would focus on “infrastructure costs”. This makes back-office staff a clear target. JP Morgan analysts estimate that €400m could be saved by getting rid of 1,900 of them. Considering the difficulties of firing German employees, workers in London and elsewhere are more likely to be shown the door.

Copyright The Financial Times Limited 2017. All rights reserved.
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