Deutsche Bank drops out of Euro Stoxx 50 index

Deutsche Bank must leave the Euro Stoxx 50, Europe's most important blue-chip stock index, by the end of the month, Germany's largest bank confirmed on Tuesday.

Deutsche Bank hereby responded to the publication of the new composition of the index by Stoxx Ltd., the index arm of German stock exchange operator Deutsche Boerse. Given a steep fall during Deutsche Bank's market capitalization in recent years, the Frankfurt-based lender is no longer included in the list of Europe's 50 most valuable publicly-listed companies as of September 24.

The Euro Stoxx 50 has traditionally included several corporate heavyweights from Germany, including the business software provider SAP, the Siemens industrial group and luxury carmaker Daimler. The energy company E.ON will be demoted alongside Deutsche Bank in September as well, while industrial gas producer Linde is set to rise into the index ahead of its merger with U.S. rival Praxair.

The decision is likely to cause financial as well as reputational damage to Deutsche Bank as it seeks to shore up its business model in protracted corporate restructuring effort. Index tracker funds with a portfolio of equities mirroring the composition of the Euro Stoxx 50 index must respond to changes in its makeup by divesting accordingly, a development which could weigh further on the ailing share price of Deutsche Bank.

So far this year, the company's valuation has already plunged by 30 percent to 20 billion euros (23.1 billion U.S. dollar). Nevertheless, Deutsche Bank insisted on Tuesday that the development would not affect its corporate strategy. The lender said its focus is on reforms to raise profitability as outlined by chief executive officer (CEO) Christian Sewing. In turn, these measures would lead to an eventual recovery of the share price.

"We have accelerated the restructuring of our bank substantially", Sewing said at the presentation of the Deutsche Bank earnings figures for the second quarter (Q2) of 2018. Not least due expensive legal settlements in connection to accusations of criminal fraud, Deutsche Bank's annual profits have been deep in the red for the past three consecutive years. Cumulative losses since 2015 stand at more than 9 billion euros.

Speaking at bank's latest annual general meeting (AGM), Sewing consequently announced that the number of staff would have to fall from currently around 97,100 to significantly below 90,000 as a consequence. "The reduction in headcount is unavoidable if our bank is to return to a sustainable path of profitability", the CEO argued.

Additionally, Deutsche Bank intends to place a greater emphasis on its European home market in the future, reducing its investment- and retail banking presence in the U.S. in particular. Sewing joined Deutsche Bank as a teenager and was named as the successor to the ousted ex-CEO John Cryan in April.