Ackermann plans Deutsche Bank overhaul

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Josef Ackermann, chief executive of Deutsche Bank, has sought to soothe fears over the bank’s performance by telling senior staff of a strategic overhaul aimed at recovering last year’s record profitability.

The plan was outlined in a letter to several hundred employees last week, as shares in Germany’s biggest bank hit their lowest value in more than a decade and concern over Citigroup gave rise to more fears over the health of one of the world’s biggest banks.

“Sentiment in the banking sector has weakened by the day,” wrote Mr Ackermann, who acknowledged Deutsche was under fire for its high leverage, exposure to potential writedowns and the outlook for its operating performance.

“You are all aware of the market’s concerns,” he told staff.

The letter shows Mr Ackermann’s alarm at the market value placed on Deutsche, which is only about one-third of its book value. “Nothing, either in respect of future losses or capital requirements, justifies the current heavily discounted price level of our stock,” he wrote.

Its shares fell almost 3 per cent on Friday to €18.80, compared with more than €90 a year ago.

The Swiss-born chief executive, who has run Deutsche since 2002, said the bank was cutting leverage, bolstering capital and reducing some of its most worrying exposures as “immediate measures” to address market concerns.

Deutsche’s executive committee – including its management board and the heads of its operating divisions – had also “initiated a process of overhauling our group strategy”, Mr Ackermann said.

It meant “some repositioning and recalibration”, Mr Ackermann said. “But we have the potential to reach, and exceed, over time the record profits we delivered [in] 2007.”

Mr Ackermann, who formerly headed Deutsche’s investment banking business, said the revenue pool for investment banking would shrink. “However, there will be fewer leading players, and we plan to capture additional market share,” he wrote.

Deutsche is reorganising its investment banking business, announcing last week 900 job cuts and reducing lines such as proprietary trading.

Mr Ackermann’s letter said the bank would seek acquisitions to expand its transaction banking division, which handles products and services for corporate clients and financial institutions.

The bank also wants its private and business clients division to generate €2bn ($2.5bn) of pre-tax profit by 2012, compared with €1.1bn last year. This is without any contribution from Postbank, where Deutsche is to become the largest shareholder.

Mr Ackermann’s letter came after Deutsche revealed steps to bolster its capital, including raising hybrid capital and selling its own treasury stock.

There were “other internal measures to come”, Mr Ackermann wrote. “We believe we can sustain the solid capital base we have without recourse to fresh capital from governments.”

Mr Ackermann said the level of leveraged finance exposure in the bank’s trading book had halved since the end of September, when it was €11.9bn – a figure helped by the reclassification of €8.1bn of loans because of accounting changes.

Deutsche has sought strength in being a “universal” bank, with retail and corporate banking and wealth management offsetting the downturn in investment banking.

Expecting a “substantial rise” in corporate defaults and consumer credit delinquencies, Mr Ackermann insisted Deutsche was nevertheless “relatively well positioned”.

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