Deutsche Bank could move as many as half its 4,600 Manhattan staff to smaller US hubs in the next five years, the lender’s US head told the Financial Times, underlining the threat to New York’s dominance as a corporate centre in the aftermath of the pandemic.
“It [the pandemic] has taught us a tonne,” said Christiana Riley, chief executive for Deutsche in the Americas. The fact that many staff had been successfully working from home for the past nine months had neutralised what were previously “bitter fights” over whether jobs could be sent to lower-cost centres.
Ms Riley, who is also a member of Deutsche’s management board, said that the New York headcount could “conceivably” be cut in half within five years, depending on the evolution of “smaller hubs and pockets”.
She said she expected banks to concentrate people in several hubs, mostly in lower-cost areas of the country, rather than embracing the “work from anywhere” model offered by some technology companies.
Deutsche’s US workforce already includes about 2,000 staff in areas such as human resources, compliance and risk in Jacksonville, Florida, as well as 600 in a technology centre in Cary, North Carolina.
Manhattan was losing finance centre jobs to cheaper cities such as Tampa and Dallas even before the pandemic upended companies’ thinking on centralising staff in a single location. Commercial vacancy rates in the city have risen from 5.7 per cent in the first quarter of the year to 7.6 per cent in the third quarter, according to data from estate agency Colliers International.
Other finance giants have signalled they may shift staff. Goldman Sachs is considering moving a number of asset management jobs to Florida as part of a broader plan to reduce costs, a person familiar with the bank’s plans said.
“I’m optimistic that New York remains, to a degree, a hub,” said Ms Riley. “You will continue to have significant amounts of institutional capital sitting in and around New York that will make it meaningful for there to be a centralised presence in New York — not to mention the specialised support skills that all of us in the industry rely on, be it legal, be it accounting, be it marketing, you name it . . . But that isn’t maybe going to be relevant for all of those people” currently working there.
Deutsche is next year due to relocate its Manhattan staff to a 1m sq ft building at Columbus Circle, near Central Park, with workspaces for 4,200 people. It can accommodate all 4,600 current staff, however, through flexible working arrangements in which some spend part of the week working from home.
The new building is also cheaper than Deutsche’s existing offices at 60 Wall Street, contributing to the cost savings that Ms Riley says will help lift the return on equity in Deutsche’s US investment bank from 9 per cent this year to 11 per cent by 2022 — as promised at Deutsche’s investor day last week.
Deutsche has already improved the return on equity in its US investment bank from 2 per cent in 2018 by axing its underperforming equities division and eliminating about 1,000 jobs and selling its prime brokerage arm to BNP Paribas as part of a global push to end years of chronic underperformance at Germany’s biggest bank.
“We have not only stabilised the remainder [of the US business], we’ve been able to demonstrate growth and the fact that there is a viable business and I do believe we have runway from here,” Ms Riley said, singling out financing and sustainable finance instruments as potential growth areas.