FRANKFURT (Reuters) - Deutsche Bank is discarding plans to set up a new digital banking service in the United States for fear of the move hampering a sweeping overhaul aimed at restoring the lender's fortunes after a damaging string of financial scandals.

An internal memo from Chief Executive John Cryan, seen by Reuters, said the bank judged that the implementation of such a service in the United States would have diverted resources from Deutsche's core strategy.

That strategy has involved a shake-up of information technology and internal processes, as well as cost-cutting measures including branch closures and job cuts.

In last year's management reshuffle, Deutsche Bank made former operations chief Henry Ritchotte responsible for development of the new digital bank in the United States.

Deutsche had said that it would spend up to 1 billion euros ($1.14 billion) on digital initiatives over the next five years.

The memo said that that Ritchotte and his group had developed an "excellent blueprint" and that Cryan would discuss new plans for the team.

"We are determined to implement several ideas generated by Henry and his team in our business divisions," Cryan's memo said without elaborating.

Deutsche Bank had intended to develop a digital bank outside its core market in much the same way that German rival Commerzbank had with its mBank operation in Poland, allowing it to test new services for potential transfer to its home market.

($1 = 0.8811 euros)

(Reporting by Andreas Kröner; Writing by Arno Schuetze; Editing by David Goodman)