Deutsche Bank AG of Germany has announced it will sever ties with 3,400 debts and services sales clients as a means of cutting costs and improving long-term profitability. The move announced on Friday via an internal memo, is part of the bank’s restructuring program aimed at restoring the fledgling bank’s performance. Deutsche Bank revealed that with immediate effect, it was going to stop debt sales services to some of its hedge funds and financial institutions. Germany’s biggest bank is aiming to cut costs any way it can, as it faces a multi-billion-dollar settlement with the U.S. justice department, over its role in the sale of bad mortgages during the financial crisis. Though sudden, the decision is not unexpected. Chief Executive John Cryan had announced in October last year that the bank would terminate its relationship with about half of the clients in its Global Markets and Corporate & Investment Banking divisions.
“We expect to off-board about half of the current list of clients as the economic returns in these relationships are inadequate to us,” he revealed in his statement last year. He disclosed that the majority of the investment bank’s income (80 percent) came from only 30 percent of its clients. The bank will now be cutting ties with clients who cost more to the company than the revenue they generate. The market conditions in Europe and globally have only made things more complicated for the bank. However, Desutsche Bank is not the first institution to let go of costly clients. Other banks have also gone on to increase their fees and have laid tougher conditions for extending credit. With their shares down 34 percent this year, continued low interest rates prevailing in Europe and tougher banking regulations, there is speculation that the bank might be in need of a bailout soon.