Deutsche Bank begins revamp, slashes 18,000 jobs

German lender Deutsche Bank started its largest and most radical revamp in more than 20 years at a cost of $7.4bn and 18,000 jobs.

The bank unveiled on Sunday its plans for a radical overhaul where it will exit its equities business after a $2.8bn loss in the second quarter and it will also cut its workforce by a fifth to try to regain profitability.

CEO Christian Sewing said the bank was "tackling what is necessary to unleash our true potential”.

The revamp follows the collapse in April of government-brokered merger talks with Commerzbank. Sewing’s plan for the changes was approved by the board on Sunday.

“This is really sad what is going on right now right now in the bank, but I guess from top management’s point of view that is what is needed to be done,” one Deutsche staff member in London told the Financial Times.

Deutsche Bank stock rose as much as 5.2% early in pre-market trading but by 1050 BST, was down 0.4% at €7.15.

JPMorgan Cazenove said the restructuring is "bold and for the first time not half-baked but a real strategic shift giving up its Tier I investment banking ambitions".

"The announcement in our view should tighten credit spreads and lead to equity re-rating of up to 10% in the short term."

JPM kept its 'neutral' rating on the shares. "We believe further questions need to be answered such as: i) credibility around execution, ii) revenue growth details and rationale, where DB has disappointed in the past, iii) employee motivation post the restructuring to go for regaining market share in Fixed Income and around DB’s ability to operate a corporate franchise without a European equity business."

RBC Capital Markets lifted its price target on the stock to €8.00 from €7.5 following the news, but kept its 'underperform, speculative risk' rating.

"Deutsche Bank's business review is more radical than expected, which we believe will support the shares in the short term," it said. "However, as the plan pushes the profitability improvement further out in time on our estimates, we see more value elsewhere in the sector."