Layoffs have started at Deutsche Bank

The layoffs have started at Deutsche Bank as the struggling lender embarks on a dramatic overhaul that will reduce its workforce by 18,000.

CEO Christian Sewing confirmed during a conference call that layoffs had started Monday in Asia. He said Deutsche Bank teams in other parts of the world would also be affected.

Sewing unveiled a restructuring on Sunday that will eliminate roughly one in five jobs at the German bank.

“I am very much aware that in rebuilding our bank, we are making deep cuts,” the CEO said in a letter to employees. “I personally greatly regret the impact this will have on some of you.”

Deutsche Bank has not given details on which offices will bear the brunt of the downsizing. The bank has said its workforce will shrink to roughly 74,000 employees by 2022.

In addition to Asia, it has big offices in London and New York and branches and outposts throughout the world.

“We will only operate where we are competitive,” Sewing said Monday. “We tried to compete in nearly every corner of the banking market at the same time. We simply spread ourselves too thin.”

Deutsche Bank will shrink its investment bank as part of the overhaul, shutter its equities sales and trading business and create a “bad bank” for €74 billion ($83 billion) in assets.

It’s a dramatic shift for a bank that has been in business for nearly 150 years. But urgent action was needed after recent attempts at restructuring failed to produce consistent profits.

Investors reacted with skepticism. After an initial move higher on Monday, shares reversed course and were down over 7% in afternoon trade in Frankfurt. The stock has shed more than 40% since Sewing became CEO 15 months ago.

Retreat from Wall Street

Germany’s biggest bank at one point dreamed of dominating investment banking, competing with the likes of American heavyweights Goldman Sachs and Morgan Stanley.

Those ambitions were made clear in 1999 with the purchase of US investment bank Bankers Trust.

But the bank — and its investment banking team in particular — struggled to find direction following the global financial crisis. The bank reported an annual profit last year for the first time since 2014.

A sluggish European economy and a reluctance to reform made it harder for Deutsche Bank to compete in the expensive sector.

The investment bank continued to suck up resources even as it fell further behind competitors. The resignation last week of the division head, Garth Ritchie, signaled that major changes were coming.

The shift announced Sunday will let Deutsche Bank take a step back from investment banking and prioritize more reliable lines of business such as corporate money management.

But the restructuring effort won’t come cheap.

The bank said that costs related to the overhaul would push it to a net loss of €2.8 billion ($3.1 billion) for the second quarter. The total cost of the restructuring will hit €7.4 billion ($8.3 billion) by 2022.