Deutsche Bank restructuring to cost up to $5.6 billion

Deutsche Bank (DE:DBKGn) expects the cost of a major overhaul in the works to be up to 5 billion euros ($3.4-$5.6 billion), one person familiar with the matter said on Wednesday.

CEO Christian Sewing flagged an extensive restructuring in May. He promised shareholders “tough cutbacks” to the investment bank to turn the lender around after it failed to agree a merger with rival Commerzbank (DE:CBKG).

The lender, Germany’s largest, is planning on cutting between 15,000 and 20,000 jobs, or more than one in five of its 91,500 employees.

A spokesman for Deutsche declined to comment on the expected cost of the restructuring. The bank said it was working on measures to accelerate its transformation so as to improve its sustainable profitability.

“We will update all stakeholders if and when required,” the bank said.

The bank’s supervisory board is due to meet on Sunday to discuss the overhaul, people familiar with the matter said.

Other measures under consideration include a reduction in the size of the bank’s nine-member management board, as well as the creation of a so-called bad bank to hold tens of billions of euros of non-core assets.

“Sewing really wants to move the needle,” said a person familiar with the plans.

Taken together, the measures are an effort to retreat from riskier investment banking – after years of rampant expansion – and focus its effort on mainstream markets.

The overhaul suggests the bank is coming to terms with its failure to keep pace with Wall Street’s big hitters such as JP Morgan and Goldman Sachs (NYSE:GS).

The bulk of the job cuts will take place outside Germany, said a person with knowledge of the plans.

That is because they are focused on the investment bank, a unit that has struggled to generate sustainable profits since the 2008 financial crisis.

The bank is planning to shrink or shutter equity and rates trading businesses outside Europe, sources have said.