, beaten down by lagging performance, will retreat from trading and lending businesses dominated by Wall Street banks while asking investors for faith that its new chief executive can succeed where others have failed.
Thursday’s message—which came in tandem with disappointing first-quarter earnings—echoed elements of the German lender’s strategy pronouncements when
took over as CEO in 2015, and again a year ago when the bank raised $8.5 billion in capital.
When new to the job, Mr. Cryan acknowledged—even highlighted—the bank’s serial underperformance. The new leadership would do more, faster, emphasizing the importance of serving German and European companies and curtailing risk.
Earlier this month, Mr. Cryan was dismissed with two years left on his contract. He was replaced with Christian Sewing, a 47-year-old career Deutsche Bank employee who most recently ran the retail- and commercial-banking division.
On Thursday, Deutsche Bank reported worse-than-expected first-quarter net income and broad revenue declines, and said it would shrink its investment bank in the U.S. and Asia.
The lender essentially admitted defeat in head-on competition with big U.S. banks in areas where those stronger Wall Street banks dominate. Deutsche Bank insisted it isn’t pulling out of the U.S., the world’s most profitable investment-banking market.
Still, the moves could mark the end of an era for a bank that over the course of two decades boomed in the U.S. and beyond, fueled by profits from its massive global trading business.
Deutsche Bank’s message again is focused on retrenching to serve Europe. But details are scant—including how many investment-banking jobs might be axed, how a mulled pullback in trading might affect the unit’s revenue, and exactly how Deutsche Bank’s new “strategic adjustments” will affect costs.
Deutsche Bank shares were down about 2% at €11.77 in afternoon trading in Frankfurt after declining earlier in the morning, then flattening out.
The bank said it plans to pull back in certain investment-banking activities that don’t make enough money to justify costs and risks. It described planned job cuts as a “material workforce reduction,” without providing numbers.
The bank left big-picture financial targets unchanged, leading some analysts to criticize the moves as too little, or too vague, to be satisfying.
Mr. Sewing asked for patience but said he isn’t wasting time.
The dismal earnings underscored the “need for immediate action,” he told analysts. He promised more details in coming months, saying that he and other Deutsche Bank executives respect investors’ lost patience.
“The call to action is simple: Focus, grow revenues and significantly reduce costs,” Mr. Sewing said. He said executives “will not agonize over decisions.”
That remark reflected persistent complaints from Deutsche Bank supervisory and management board members that Mr. Cryan was sharply analytical but slow to make difficult decisions, according to people inside and outside the bank. Mr. Cryan hasn’t commented on the criticism.
Under Mr. Cryan, Deutsche Bank settled big legal cases that had hung over the lender, boosted capital and axed expenses. But the bank missed cost-cutting targets, lost market share in key businesses and posted three consecutive full-year net losses.
Deutsche Bank’s shares have fallen 25% this year and are down more than 30% from a year ago.
On Thursday, Deutsche Bank said first-quarter net income declined 79%, to €120 million ($145.9 million). Companywide revenue declined 5% to €7 billion in the quarter. Revenue in the investment bank declined 13% to €3.8 billion, with fixed-income trading revenue down 16%, and equities sales and trading revenue down 21%.
Euro exchange rates and some one-time events amplified the declines.
Hedge funds will get less of Deutsche Bank’s balance sheet to amplify their trades through the prime brokerage unit, in a reversal from Mr. Cryan’s earlier plans. The bank plans to shrink its equities-trading business, which could hit areas heavily reliant on technology, where it has fallen behind other banks.
Deutsche Bank will scale back trading in U.S. interest rates and certain securities financing, and focus on helping European clients do deals, manage their cash and global payments and hedge currency risks. The bank will also continue to shed real estate.
This month, Deutsche Bank announced that two other senior executives besides Mr. Cryan—investment-banking co-head
and operations and technology chief Kim Hammonds—will leave next month.
previously co-head of the investment bank, is now running that entire division, and the bank named a new chief operating officer from the retail-banking division.
Some investors have questioned whether Deutsche Bank should split its retail and investment banks, radically redefining the bank. But executives argue that maintaining a strong, integrated global investment bank is crucial to the lender’s core mission of serving German companies abroad.
Other European investment banks are still battling through multiyear turnarounds, but with sharp differences.
PLC appears to be pushing deeper into investment banking. The British lender on Thursday reported improved first-quarter revenue in the unit, while facing pressure from a newly arrived activist investor.
Deutsche Bank’s German home market trails the U.S. and U.K. in retail- and investment-banking profitability. And compared with its big Swiss rivals, Deutsche Bank lacks scale in private banking and asset management. Executives said Thursday they would rebalance businesses toward “more stable revenue sources.”
Write to Jenny Strasburg at email@example.com