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Deutsche Bank Inks Deal to Close 200 Branches in Germany

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Deutsche Bank AG (DB - Free Report) has reportedly inked a deal with its German works council to close around a quarter of the bank’s branches in its domestic market. The news was reported by Reuters citing people familiar with the matter.

The report stated that the major part of headcount reduction agreed upon with the works council will be tied to the closure of about 200 of the bank’s 723 branches in Germany. Notably, last October Deutsche Bank had announced plans to lay off 9,000 full-time employees, including 4,000 based in Germany.

Specific details of the deal are likely to be announced today. The company’s branch closures will mainly be focused on larger cities while smaller towns will be spared from a broad pull back.

Last month, Deutsche Bank’s Chief Executive officer, John Cryan, who is focused on the company’s restructuring and cost saving measures, had revealed about the bank’s substantial progress in its discussion with the German works council. He said, “It's taken an awful long time to get to agreement. And we're still not quite there yet, but I am pretty confident that within the next month or two, we'll have an agreement".

The move does not surprise as the German banking giant had reiterated its branch closure plans in its interim report for first-quarter 2016. The company noted, “In line with the changing behavior of our clients, we aim to sharpen our distribution model by strengthening our omni-channel capabilities with additional investments into our digital offerings and by closing around 200 branches in Germany.”

Deutsche Bank, seeking to trim its global footprint, has already closed around18 retail branches in Spain and 25 branches in Poland.

Bottom Line

To keep up with the technologically sophisticated customers, financial institutions are keen on integrating new digital technologies into their system. Notably, last month HSBC Holdings plc (HSBC - Free Report) disclosed plans to close 24 of its 50 branches in India to focus more on digital banking channels to expand its urban customer base.

Further, as banks globally face revenue pressure amid low and negative interest rates environment and strict regulations, cost cutting initiatives through layoffs and branch closures have become their favored tactic to drive efficiencies.

Deutsche Bank currently carries a Zacks Rank#5 (Strong Sell). A couple of favorably placed stocks in the foreign banks include Canadian Imperial Bank of Commerce (CM - Free Report) and Bank of Montreal (BMO - Free Report) each sporting a Zacks Rank #1 (Strong Buy).

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