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Deutsche cuts retail unit
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January 4, 2000: 9:54 a.m. ET
Europe's largest bank to close 250 retail branches, ax 1,200 jobs in restructuring
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LONDON (CNNfn) - Deutsche Bank, Europe's largest bank, announced plans Tuesday to shut 250 branches and slash 1,200 jobs in its loss-making retail network over the next 18 months.
Deutsche Bank 24, a new unit spawned by the fusion of Deutsche's retail and online operations last year, said it plans to close 300 of its 1,300 retail branches while adding an additional 50 consulting centers.
Germany's four largest private banks - Deutsche, Commerzbank, Dresdner Bank and HypoVereinsbank - have been waging an uphill battle in recent months to compete more effectively with the country's dominant network of non-profit savings and mutual banks.
Deutsche Bank has only about 5 percent of the German retail banking market, yet the most expensive operation with a cost-to-income ratio of more than 80 percent. It became the world’s largest bank in terms of assets after buying U.S.-based Bankers Trust early last year.
Until recently, Deutsche had been in serious talks with both Dresdner and Commerzbank over ways to possibly combine their retail operations to take on the non-profit banks more effectively.
Those talks foundered over a variety of issues, including branding and control, prompting Deutsche to take its own steps to improve its retail position.
"I think this is the response of Deutsche Bank as a result of these failures," Adrian Pilz, banking analyst with Fox-Pitt Kelton in London, told CNNfn.com. "They have never been able to compete’’ against the mutuals and savings banks.
Establishing DB24 was itself intended as a way to cut the costs of running unprofitable main-street bank branches in an age where a growing number of people are expected to shift to telephone and online banking. Yet the cost of setting up the new unit - estimated at around 600 million euros ($603 million) - has weighed on Deutsche’s finances.
Banking habits in flux
Pilz said he believes the venture is likely to prove profitable down the road, however, as traditional banking habits change radically.
The way people bank in Germany "is changing very rapidly," he said. "The mass of banking is going to be done over the telephone and the Internet over the next five years and it is very important for the big banks to position themselves effectively."
James Hyde, a banking analyst with Merrill Lynch in London, said the bank's retail operation had been performing "alright" until the relaunch of the division in the guise of Deutsche Bank 24. He noted that retail banking lagged far behind investment banking in Germany in 1999.
The logic of the relaunch, he said, was to "force greater numbers of users to telephone" their bank transactions, reducing the necessity of maintaining costly bricks-and-mortar branches.
Hyde said the restructuring will probably result in "quite a lot of short-term pain" for banks like Deutsche.
Deutsche Bank itself gave a glimpse of the future Tuesday when it revealed that in its first four months DB24 had attracted 100,000 new customers - of whom about a third do their transactions online.
The division announced plans to spend 500 million marks ($257 million) on restructuring the retail unit - a cost that includes the measures unveiled Tuesday.
Deutsche's five divisions include Retail and Private Banking; Corporate and Real Estate; Global Corporations and Institutions; Asset Management; and Global Technology and Services. Its subsidiaries include Deutsche Bank Alex. Brown and Deutsche Asset Management, formerly known as Deutsche Morgan Grenfell. 
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Deutsche Bank
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