Deutsche Bank division cuts external consultancy spend by 70%

Deutsche Bank’s private banking division has slashed spending on external consultants by 70% under its new head, Claudio de Sanctis, as part of a broader effort to boost profitability following a failed IT project last year.

Claudio De Sanctis, who replaced Karl von Rohr in July 2023, has significantly reduced reliance on external advisers, ending several projects involving firms like Boston Consulting Group, according to sources familiar with the changes.

The decision to cut consultancy spending, amounting to a double-digit-million-euro reduction, aligns with the bank’s broader cost-cutting goals, and the strategy to leverage internal expertise to resolve complex and recurring issues.

“Working with external consultants can be seen as an easy way out. We need to bring our expert knowledge to fix our recurring problems ourselves,” De Sanctis told the Financial Times, emphasizing that the current lower consultancy budgets are intended to be permanent.

Historically plagued by high costs and weak profitability, Deutsche Bank’s private bank has struggled to maintain a favourable cost-to-income ratio. In 2023, while the division generated 33% of the lender’s revenue, it accounted for only 19% of pre-tax profits.

The private bank, which employs 38,000 staff, oversees German retail banking operations, including the Postbank brand, and wealth management. The division has a history of relying on external consultants, with Bain & Company leading a restructuring project in 2017 and McKinsey & Company working on a new corporate strategy one year later.

More recently, Boston Consulting Group was tapped to spearhead a digital investment platform project, codenamed Vestivity, which was terminated by De Sanctis earlier this year. Boston Consulting Group declined to comment on the matter.

In addition to cutting consultancy costs, De Sanctis has intensified other cost-cutting measures, including a plan to close up to 250 of Postbank’s 550 remaining branches, a move agreed upon with unions.

The division’s efforts to enhance profitability come in the wake of last summer’s disastrous migration of 12 million Postbank customers to a new IT system. That migration was managed so poorly that Deutsche Bank incurred over €100 million in additional costs and was handed a public reprimand from Germany’s financial services regulator, Federal Financial Supervisory Authority (BaFin).