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Deutsche Bank has finally called time on a 20-year campaign to rival the likes of Goldman Sachs and J.P. Morgan Chase & Co.

The bank, Germany’s largest, confirmed on Sunday that it will shed around 18,000 jobs, nearly a quarter of its entire workforce, as it pulls out of global equities trading and scales down other businesses in search of a life with fewer risks and scandals. The cuts, which will shrink the bank’s risk-adjusted balance sheet by over 20%, are likely to hit its operations in the U.S. and U.K. particularly hard.

In a memo to staff, chief executive Christian Sewing described the move as a “fundamental rebuilding…which, in a way, also takes us back to our roots” of serving German and European businesses.

End of a questionable era

However, it also marks a reckoning with two decades of reckless management, in which the bank had been run chiefly for the benefit of its richly-paid managers and traders, rather than its owners. Deutsche has paid out more in bonuses than in dividends over the last 20 years, and its shares have hit a series of record lows since 2016 as it has spent billions on settlements for everything from mis-selling mortgage bonds and manipulating interest rates to laundering Russian money.

Investment bank head Garth Ritchie, Deutsche’s top earner last year with a total package of 8.6 million euros, announced his departure on Friday. Two other board members—chief regulatory officer Sylvie Matherath and Frank Strauss—followed on Sunday.

The shares have rallied some 20% since details of the restructuring started to leak out but are still down over 93% from their 2007 peak. (On Monday, they were slightly lower after initially popping 3%.) By contrast, J.P. Morgan’s are at more than double their pre-crisis peak while Goldman Sachs’s are down less than 20% from theirs (and had hit a new all-time high last year before the U.S. trade war with China took its toll on markets worldwide).

An uncertain future

The trouble is that the business that Deutsche is banking on for its future is itself in a miserable state. There is precious little money to be made taking deposits from and lending to Germans, when the European Central Bank’s interest rates are about to fall further below zero, and when state-owned savings banks depress margins on what loan business there is to pennies. There is little potential to speed up the streamlining of its retail banking business, thanks to the strength of German labor law, which has allowed unions to insist on a strict cap on job cuts through 2021.

Moreover, a weakening economy is now set to hit the bank’s loan book: provisions against losses on loans to individuals and businesses rose some 30% in the first quarter from what is likely to be a cyclical low point, business surveys show manufacturing still in recession, and the number of seasonally-adjusted jobless rose by the most in 10 years in May (although it steadied in June).

Even if everything goes as well for Deutsche as its management plans—an outcome that recent years suggest is unlikely—the bank will pay no dividends for the next two years and will still be struggling to earn its cost of capital even after four years. When Sewing took over as CEO last year, his profitability target was a return on tangible equity of 10% by 2020. On Sunday, he said he expects that figure to be no more than 8% by 2022. In that year, he expects costs to equal 70% of revenue (J.P. Morgan’s efficiency ratio is around 55%, while Citigroup’s is just over 57%).

In the meantime, this year’s hoped-for profit will be wiped out by an expected 5.1 billion euros of restructuring charges, with another 2.3 billion euros to follow in the next three years.

A diminishing threat

The silver lining is that an institution dubbed the world’s most dangerous bank by the International Monetary Fund in 2016 will finally become less big, less complex and, consequently, less of a threat to the global financial system.

The restructuring charges will eat into its capital, but by transferring a massive 288 billion euros of assets into what it called a “capital release unit” (please don’t call it a ‘bad bank’), Deutsche has alleviated the fears of its regulators. They had effectively killed a planned merger with smaller, cross-town rival Commerzbank earlier this year on the grounds that it would create a Too-Big-to-Fail monster.

In its statement on Sunday, Deutsche said it plans to let its core tier 1 capital ratio—a key metric of financial strength—fall well below its current level of 13.7%. Banks with lower risk profiles are deemed not to need as much capital to cover potential losses, and Deutsche’s new target of 12.5% still compares favorably with rivals such as Spain’s Santander (11.3%) or Italy’s Unicredit (12.3%). It won’t allow too much room for huge bonuses in the future, but that, you might say, is the point.

The Party’s Over for ‘The World’s Most Dangerous Bank’

End of a questionable era

An uncertain future

A diminishing threat

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