If you’re employed by Deutsche Bank and you see technologists taking an unusual interest in your workflows, then beware. Deutsche still has thousands of jobs to cut from its investment bank, and technology is its primary weapon in their elimination.
“Eighty per cent of the coming €1.2bn of reductions at Deutsche will be achieved by using technology to streamline costs,” said Ram Nayak, head of Deutsche’s markets business and co-head of the investment bank, speaking at last week’s ‘investor deep dive.’ Deutsche cut 975 jobs from the front office in the first phase of its restructuring between July and October, said Nayak, but the next few years are all about cutting from the middle and back office – and using technology to achieve this.
The German bank is already busy simplifying its technology architecture and decommissioning unwanted applications. In fixed income trading, for example, Nayak said Deutsche is consolidating all its activities from client interactions to post grade services onto, “three best in class internally engineered platforms.” In particular, the platform underpinning the FX trading business is being replicated across the whole of fixed income so that 30% of the bank’s applications can be decommisioned over the next three years and spending on tech can be cut by €200m.
Technological improvements are already making some humans at Deutsche unnecessary. When Deutsche moved its rates business onto the new infrastructure platform it reduced the workload of related finance teams by 70%, said Nayak. Elsewhere, a new automated valuation process enabled a 25% reduction in headcount in the valuations team – rising to an anticipated 30% once the changes are bedded-in. And Nayak said automation in the Asian credit risk business has enabled the elimination of the “entire support area” focused on monitoring credit exposure in some derivative transactions.
Deutsche’s successful automation of various finance jobs follows its former CEO’s observation that a lot of employees at the bank were doing jobs that involved them, “basically being an abacus,” and that therefore could easily be given to “robots.”
Someone has to build the ‘robots’ though, and this is where Deutsche’s technology staff come in. Somewhat confusingly, Nayak said last week that half the 10,000 investment bank staff Deutsche defines as being in the ‘front office’ on its quarterly reports are actually working in technology roles. The implication is that Deutsche employs far more technologists – and far fewer front office bankers and traders, than previously thought.
Even as these technologists are being set to work extracting €1.2bn in costs from the investment bank by 2022, however, some of their own jobs may be under threat. €300m of the cost reduction number is due to come from spending less on technology itself, both as a result of decommissioning applications and from investing in ‘offshore centers of excellence’ in places like Romania and India. Deutsche’s army of technologists is key to its future, but it may look rather different in three years’ time.
Sarah Butcher – Read more on efinancialcareers.com