FRANKFURT (Reuters) - Deutsche Bank's DBKGn.DE new co-chief executive Anshu Jain is to cut 1,500 jobs at the group's investment bank, which he helped build, as part of a drive to save 3 billion euros ($3.69 billion) after a profit slump due to the euro zone crisis.

Anshu Jain (C) and Juergen Fitschen (L) designated co-successors of Josef Ackermann (R), outgoing CEO of Germany's largest business bank, Deutsche Bank AG pose for a picture prior to the bank's annual shareholders meeting in Frankfurt May 31, 2012. REUTERS/Alex Domanski

The cuts represent about 15 percent of staff at the investment banking division, which for years has generated the lion’s share of profits. It also marks an about turn for the German bank, which in April said it saw no need for layoffs.

The plan to cut a total of 1,900 jobs mostly outside Germany comes as investment banks across the world are having to retrench to meet stricter bank capital rules.

The cost-cutting forms part of a broader overhaul at Germany’s biggest bank under new co-chief executives Jain and Juergen Fitschen who took the helm in June.

Jain used to run the investment bank and its ranks of debt, currency, stock and commodity traders, known in the industry as ‘Anshu’s Army.’

“Our prospects and our future view on profitability is different today than it was in 2010,” Jain said in his first call with analysts since taking over as co-chief. He said profit expectations had moved “closer to our grim scenario.”

“Difficult economic conditions and financial markets, increased regulatory oversight and litigation are known headwinds for us and the industry. These headwinds don’t excuse us from growth,” Jain said.

“Put simply: our cost base is too high.”

Deutsche Bank’s shares reversed early losses after the job cuts were announced to gain more than two percent.

The bank also said it aims to fulfill capital requirements by cutting costs, shedding risky assets and by overhauling businesses which lack promise.

Fund manager Helmut Hipper from Union Investment - one of Deutsche Bank’s top 20 shareholders - said that the results from the bank’s sales and trading business were not that bad compared with peers. “Deutsche Bank is benefiting from expanding its business and gaining market share”, Hipper said, adding that the bank still needed to explain why its cost base was so high.

Swiss rival UBS UBSN.VX also reported a big fall in profits on Tuesday after losses at its investment bank.

STRATEGY REVIEW

Deutsche Bank hopes to complete the job cuts by the end of the year and in September will give an update on future profitability when it provides more detail on a strategic review.

Deutsche blamed the weak euro for inflating its dollar and sterling cost base, shrinking its second-quarter net income to 661 million euros from the 1.2 billion a year before.

Analysts had forecast a pretax profit of 1.4 billion euros and net income of 1 billion.

Pretax profit from investment banking dropped 63 percent to 357 million euros ($437 million) in the second quarter from 969 million euros in the year-earlier period.

“The European sovereign debt crisis continues to weigh on investor confidence and client activity across the bank,” Deutsche Bank’s co-chiefs Jain and Fitschen said in a statement.

Revenues from sales and trading in debt and other products fell even though the bank cut back risk-taking to correspond with subdued trading volumes.

Deutsche Bank’s lower quarterly revenues pushed its compensation ratio up 2.9 percentage points to 42.3 percent, although cash bonuses were pared back. The ratio is used to show how much a bank pays staff in relation to its revenues.

Jain said the bank was reviewing its compensation practices to address both the absolute level of compensation and the relative balance between rewards for shareholders and staff.

Deutsche Bank did not say whether it had set aside funds for potential costs related to settling an investigation into suspected rigging of key interest rate Libor, adding that an internal probe had found no wrongdoing among board members.

“We can - and we will - ensure that the tone at the top is crystal clear, maintain first-class compliance and risk management systems, and do our best to root out bad behavior”, Jain said.