Deutsche takes 4 billion euro charge, but won't raise capital

FRANKFURT (Reuters) - Deutsche Bank will not ask shareholders for new cash but instead cut bonuses and other costs and sell assets to meet tighter capital rules, its new chief executives said on Tuesday as they pledged to end a risk culture driven by short-term gain.

A crash diet involving a 4-billion euro ($5 billion) restructuring charge and 45 billion euros in asset sales by March is designed to help the flagship German lender tackle a cyclical and structural downturn in finance, while it retains a worldwide business offering a full range of banking services.

More jobs are also likely to go, beyond the total of 1,900 positions already earmarked recently for cuts.

"The medium-term economic and regulatory outlook is challenging, hence we need to significantly improve our operating performance and efficiency," joint CEOs Anshu Jain and Juergen Fitschen said in a statement setting out their strategy, 100 days after they formally took charge.

Just as the euro zone debt crisis has caused first-half profits to tumble at Deutsche, tougher regulations have forced lenders to shore up capital and change their business models to prevent a repeat of the 2007-08 financial markets crisis.

The new team now aims to slash annual costs by 4.5 billion euros by 2015 and move 125 billion euros worth of risky assets into a non-core unit that will aim to sell them off.

Fitschen and Jain also said a change to the bank's corporate culture was "imperative", echoing comments made on Monday by the new CEO of troubled British rival Barclays . Jain said it was not clear how many jobs would go, but added: "We expect it to be over and above the target of 1,900."

One focus of job cuts would be the "failed securitization, complex derivatives businesses we had", he said.

CULTURAL REVOLUTION

Deutsche said it would change pay to encourage its bankers to focus on "longer-term sustainable performance". Calling that a "behavioral change", it was an implicit acknowledgement that chasing rapid, but riskier, returns has proved expensive.

Bonuses will be cut in relation to business performance and senior managers will have to wait five years to receive bonus share awards, rather than have them staggered over three years. Already an independent panel is reviewing the structure of pay, it said, and its findings would affect this year's bonuses.

Annual bonuses worth sometimes millions of dollars and many times the typical earnings of European voters have been a lightning rod for public protests against banks and have been blamed for promoting the risk-taking that led to the crisis.

SHARES RISE

Deutsche Bank shares rose after the statement to be up 1.8 percent at 32.42 euros at 0746 EDT as traders said there was relief the bank did not plan to issue new shares.

"The main thing is that they will be able to avoid a capital increase," said analyst Heino Ruland of Ruland Research.

In that context, the 4-billion euro charge was acceptable, he added: "People are looking at the costs and thinking of the saying: 'Better an end to horror than horror without end'."

Global banks are battling to adjust to difficult markets and a set of stricter capital rules dubbed Basel 3.

Most rivals are axing jobs to cut costs, and Japan's Nomura <8604.T> last week said it will make cuts in its equities and investment banking businesses.

Deutsche Bank said it aims to deliver a post-tax return on equity (RoE) of at least 12 percent by 2015.

The bank previously defined its main profit target using pre-tax return on equity as its benchmark. In the second quarter, Deutsche's pretax RoE was 6.8 percent.

Raising capital levels has made it tougher for the lender to meet its former target of earning pretax return on equity (RoE) of at least 25 percent.

The bank confirmed its commitment to a universal banking model and its global footprint, saying its strategic priority was in the Asia-Pacific region, where it saw most growth.

It said it also plans to consolidate its real estate portfolio and will put about 40 properties up for sale.

(Additional reporting by Ludwig Burger and Steve Slater; Editing by Alastair Macdonald)