Deutsche Bank is preparing for a possible recession, the bank’s chief executive said on Thursday, arguing that the sweeping restructure announced a few months ago will help it to weather a gathering economic storm.
“To achieve our aims and serve our clients against a backdrop of global macroeconomic risks, low interest rates, and a fragmenting Europe, we must make ourselves weatherproof,” Deutsche Bank CEO Christian Sewing said on Thursday.
“A stable structure of a bank has never been more important than right now.”
Sewing’s weatherproofing comment was in reference to the radical restructure of the bank announced in July that included 18,000 job cuts globally and the closure of its equity trading business. The overhaul is ongoing, but thousands of bankers have already been let go.
Earlier in his keynote at the SIBOS banking conference in London, Sewing sounded the alarm on global growth and Europe’s economy in particular.
“Especially for Europe, the sky has darkened,” he said. “The most obvious proof is my home country Germany. After a decade of growth, the economy is expected to shrink for the second quarter in a row.”
Sewing blamed the ongoing trade war between the US and China for depressing the global economy.
“With this new strategy, we see ourselves prepared for an economic downturn,” Sewing said.
Deutsche Bank lost €3.1bn (£2.75bn) in the second quarter of this year, in part driven by the cost of the turn around plan, and some analysts and investors are sceptical that the turnaround plan will work.
Barclays’ said shortly after the restructure was announced: “We do not think the latest plan marks a turning point in the story.” Analysts suggested Deutsche Bank will struggle to hit revenue targets and may have to raise more cash from investors.
Sewing defended the strategy on Thursday, saying: “Reactions to our new strategy have been consistently positive, with a great deal of encouragement from clients in particular.
“Nobody actually questions if we are going in the right direction.”
Sewing also used his speech to attack the European Central Bank (ECB) for turning “on their money tap to the limit.”
“Very few economists believe that cheaper money at this level will have any effect, something our clients absolutely reinforce,” Sewing said. “All, and I tell you all, SMEs [small and medium enterprises] tell me they will not invest an additional euro just because the loan will be an additional 10 basis points cheaper.”
The ECB cut interest rates for the first time since 2016 earlier this month, reducing the headline rate from -0.4% to -0.5%.
“While we probably won’t see the positive effects, there are lots of negative ones like the distortion of asset prices, the continued redistribution of wealth in favour of the asset-owning affluent, and the social implications,” Sewing said.
He said central banks have “no conventional measures left to effectively cushion a real economic crisis.”
“What is really worrying is the central banks have used their tools to a large extent already,” he said.
In his speech, Sewing also warned that Europe risks being left behind unless policymakers reform the bloc to make it more tech friendly.
Oscar Williams-Grut covers banking, fintech, and finance for Yahoo Finance UK. Follow him on Twitter at @OscarWGrut.