Deutsche Bank's Crash Diet

Chief Executive Officer Christian Sewing is slashing businesses in a bid to save the 150-year-old megabank

- Steven Arons

CHRISTIAN SEWING’S SHOCK WAS plain to see, the color draining from his face. The chief executive officer of Deutsche Bank AG had just unveiled his long-awaited plan to fix the troubled lender. It included a retreat from equities trading, a focus on corporate banking, and the elimination of 18,000 jobs, a fifth of the workforce. To underscore his conviction, he’d even pledged to invest a chunk of his own pay in Deutsche Bank stock every month.

Then he checked his phone. The shares were in free-fall; they lost as much as 7.3% that day, July 8, and tumbled again on July 9. Shareholders had reached the same, grim verdict: Sewing’s goals were unrealistic for a bank that had consistently disappointed investors. His plan continued to rely on a global investment bank with shrinking revenue and a low-profit retail bank in a home market plagued by fierce competition and negative interest rates.

It was a sucker punch for the former risk manager. Sewing had spent his entire first year as CEO building up to this moment. He’d purged the management board of dissenters, wooed regulators and investors. He’d rejected an alternative strategy that some key stakeholders favored: merging with Deutsche Bank’s German rival, Commerzbank AG. But the market reaction was a reminder that if his strategy was going to work, it wouldn’t happen quickly, and there was no room for error.

History contains innumerable examples of corporate giants struggling to adapt to a changing world. What makes Deutsche Bank’s story particularly resonant is not just that the risks involve a systemically important bank with a €1.5 trillion ($1.66 trillion) balance sheet. It’s also the way the bank’s fate follows the trajectory of corporate globalization over the last three decades.