Deutsche Bank has scrapped its plans to establish a new digital bank in the US as it sees diversion of funds from its core strategy.
Germany’s largest lender chief executive officer John Cryan said in an internal memo to bank staff which was accessed by Reuters, that setting up a digital bank would have led to diversions of resources from Deutsche’s core strategy.
Its strategy included restructuring of information technology and internal processes, apart from other cost reduction initiatives such as shutdown of branches and employee layoffs.
In a management rejig announced last year, Deutsche Bank appointed Henry Ritchotte, who was former operations head, to lead the development of the US digital bank.
Ritchotte and his group had developed an "excellent blueprint" and the CEO would hold discussions on the new plans for the team, the publication reported, citing the memo.
"We are determined to implement several ideas generated by Henry and his team in our business divisions," Cryan’s memo without giving details.
Earlier, the bank had said that it would invest nearly €1bn ($1.14bn) on digital projects over the next five years.
Last month, the bank expected further rise in its legal costs this year, as it continues to face several lawsuits that have weighed on its profits.
Cryan had said that the bank has made provisions of €5.4bn ($6bn) to settle pending litigation issues in 2016.
The bank saw 58% decline in its net profit in the first quarter of this year, as volatile global markets dragged down its trading revenues.
Net income of the bank stood at €236m in the January-March quarter, compared to €559m in the same quarter last year. Its revenue fell 22% to €8.1bn in the quarter.
The lender posted a 15% drop in its corporate and investment banking division and a 23% decline in its global markets unit, mainly due to reduced client activity.
Image: Deutsche Bank in Warsaw, Poland. Photo courtesy of Deutsche Bank.