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29 October 2015

Reuters: European investment banks get the nip and tuck treatment

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Europe's biggest investment banks are slimming down in a fight for survival, eight years after the global financial crisis wrought regulatory changes and sparked litigation costs that have left them still struggling to achieve profitability.

Deutsche Bank is embarking on "Strategy 2020", Barclays on "Strategy Refresh" and Credit Suisse is "right-sizing". The treatment looks familiar: change management, launch a strategic review, scale back, cut jobs, shed assets and slash costs. Less predictable is whether such measures will make them lean, mean and freshly competitive.

Retrenching and cost-cutting European investment banks are on course to lose market share to their bigger U.S. rivals for the 10th straight year in 2015, leaving the continent in danger of having no global champion.

But not all is gloom in Europe. Switzerland's UBS for instance exemplifies how scaling back can reap rewards, having drastically restructured its investment bank in 2012. It's forecast to make an ROE of 16.1 percent in 2015.

John Cryan, Deutsche Bank's new chief executive, said he would cut 15,000 jobs at Germany's biggest bank, exit 10 countries and cut costs to less than 22 billion euros by 2018. Cryan, a former UBS finance director, had already announced he would split Deutsche's investment bank in two. In both its Global Markets division, which will house sales and trading activities, and Corporate and Investment Banking (CIB), the bank will halve its number of clients. It said that's because 30 percent of clients produce 80 percent of revenue.

Britain's Barclays, meanwhile, is just over halfway through a three-year plan to cut 19,000 jobs, including 7,000 in the investment bank. This week it appointed former JPmorgan investment bank boss James "Jes" Staley as its third new CEO since the 2008 crisis.

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© Reuters

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