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Deutsche Bank’s planned tech spend unaffected by global crisis

Deutsche bank is driving on with its ambitious IT investment plans, with the Covid-19 pandemic, if anything, adding fuel to it

Karl Flinders
By
Published: 14 May 2020 13:15

Deutsche Bank’s ambitious technology plans will not be derailed by the current global pandemic and imminent recession, with technology investments planned to help the bank do much more and cut costs in parallel.

In fact, the company’s reaction to the pandemic, particularly the sudden introduction of home working and reduced travel, has further proven the importance of technology and presented new cost-cutting possibilities.

The bank had already identified the importance of the latest digital technologies for revenue growth. In July, CEO Christian Sewing said the bank wanted to become a technology company and digital leader, with plans to spend €13bn on IT through to 2022. This is in parallel with cost cutting plans, which includes cutting 18,000 staff.

Sewing will tell the bank’s shareholders at its annual general meeting on Wednesday 20 May that the bank remains committed to its technology spending plans. In his speech, he will say: “Technology is more important than ever – a fact that the coronavirus crisis is serving to highlight very well. Digital business models are the big winners, and this trend won’t suddenly reverse once the pandemic subsides.”

His speech was published in advance of the, now virtual, meeting to “facilitate the dialogue with our shareholders”, said the bank.

Sewing reaffirmed that tech will drive revenues, and describe how the pandemic will leave a technology legacy that will reduce operating costs.

“Because technology is so key to our success, we are committed to spending a total of  €13bn on IT from 2019 to 2022. We are putting this budget to work precisely in those businesses where we are strongest. Thus we have fewer projects but we’re investing more in each one.”

Changing working practices

Sewing described how changing working practices, forced upon the bank by Covid-19 lockdowns, have proved a success and are likely to change how people work in the future. “If 60% of employees worldwide can work away from their offices and still deliver excellent service to our clients, then of course we have to ask ourselves: can we give our staff additional flexibility to work from home if they want to?”

He added that new working practices will also support cost-cutting through technologies that enable people to work remotely and hold virtual meetings.

“Do we need quite so many offices in expensive urban centres? If, in many cases, video conferencing is almost as good as visiting a client – do our staff still have to travel, and especially to fly, so much?

“Of course there’s often no substitute for face-to-face meetings with clients, regulators and colleagues, and we want to be close to our clients,” he said. “But we have decided that we are going to significantly reduce the time we spend travelling. This will cut costs – and benefit the environment.”

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Deutsche Bank is certainly not alone in the banking sector. Jes Staley, CEO at Barclays Bank, which has 85,000 staff, recently said the company will change how it thinks about its locations. “The notion of putting 7,000 people in a building may be a thing of the past,” he said.

But while the cost-cutting role of tech has been demonstrated during Covid-19 lockdown, the vast majority of Deutsche Bank’s IT investments will be channeled towards technology that will increase revenues, with online and mobile services already creating value.

“It’s not just key to us becoming more efficient, it’s also key to us providing a better service for our clients,” said Sewing. “For instance, more of our clients are using our mobile banking app and our online banking service.” Meanwhile about 30% of the bank’s foreign exchange revenues are based on technological innovations implemented in the past five years, he said.

Cloud computing is another area to receive focus. In fact, Sewing said the bank is about to “take a quantum leap in innovation” through working with cloud providers. “We will have access to the most modern IT infrastructure without having to actually own and run it.

“Together with our partners, we want to use the cloud as an accelerator for innovation, for example, by deploying more artificial intelligence and machine learning technology. We’ll be able to accomplish more and innovate more – and we’ll be cutting our costs as we do so.”

After initial caution, banks are increasingly working with suppliers such as Amazon Web Services, Google and Microsoft to access on-demand cloud infrastructures and development tools.

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