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Deutsche Bank’s retail unit has pledged to deliver an extra €50mn in cost savings from IT next year, after telling investors last month it would fall short of a long-standing target for 2025 because of further delays to the integration of its Postbank subsidiary.
Claudio de Sanctis, the head of Deutsche’s private bank, told the Financial Times that the German lender was stepping up efforts to streamline its IT and planned to eliminate more software systems and IT infrastructure than intended.
The plans, designed to save another €50mn in annual IT costs from 2026, come as Deutsche disclosed to shareholders in May that it had only realised €270mn of IT cost savings in the retail unit, compared with a target for the year of €300mn.
De Sanctis, who has been in charge of the retail division since mid-2023, told the FT that the latest shortfall was temporary and would be compensated by higher savings in future years. “From 2026 onwards, we are achieving more than €320mn [per year],” he said.
Deutsche originally earmarked €300mn in annual cost savings as a target to be achieved by 2022. But it pushed that back by three years as efforts to integrate the IT systems of Postbank — which it acquired in 2010 — with its other German retail operations ran into delays.
The migration of 12mn customers and billions of data points — dubbed Project Unity — resulted in months of disruption in 2023, with internal workflows collapsing and thousands of customers unable to access funds. German financial watchdog BaFin dispatched a special monitor to supervise the clean-up and issued a fine.
With €9.4bn in annual revenue last year, Deutsche’s private bank is one of the lender’s largest divisions. Historically it has underperformed, however, because of high costs and low profitability. Last year, the division contributed 31 per cent of group revenue but just 23 per cent of pre-tax profits.
The unit is in the midst of a cost-cutting drive, with headcount down from 38,500 at the end of 2023 to 36,800 in the first quarter of this year and 200 of 1,400 branches closed in that time. Deutsche plans to eliminate a further 2,000 jobs and dozens more branches this year.
The division’s cost-income ratio — a key efficiency metric — has improved from 81 per cent to 71 per cent in that time, but remains higher than the figure of 61 per cent for the group as a whole. De Sanctis’s predecessor, Karl von Rohr, had set a target of 60-65 per cent for 2025.
De Sanctis was adamant that the private bank was now shifting back to expansionary mode, however, with investments in wealth management and digitisation.
Spending would be limited to “as much as we can afford in order to deliver the cost income ratio expected”, the banker said.
But he added that the unit planned to hire up to 200 wealth management staff “over the next couple of years”, and develop a digital investment engine to persuade middle-class retail clients to invest a higher proportion of their savings in the equity market.
“You need to be able to exchange properly, qualitatively, with your client on a digital platform,” said de Sanctis. “If you have a regular German saver who always needs to see a person to do his pension plan, this is not efficient.”
While building such technology in-house remains an option, a person familiar with the matter said that buying one or entering a joint venture with an external partner would be faster and more cost-effective.
https://www.ft.com/content/7553f83f-8094-4dac-bc8e-a866e2468da3
