John Cryan’s appointment as Deutsche Bank chief executive officer sent shares in Germany’s largest lender up 8 percent yesterday, as investors judged the Briton a more credible contender than his two ousted predecessors to revive its fortunes.
Cryan faces one of the most difficult jobs in global finance as he aims to move Deutsche Bank beyond the raft of regulatory and legal probes that have ensnared the bank under its current management and execute a strategic overhaul.
Cryan takes over from Deutsche Bank co-chief executives, Anshu Jain and Juergen Fitschen, who announced their resignations on Sunday, a month after unveiling a cost-cutting drive designed to arrest the bank’s sub-par performance.
Investor skepticism with the turnaround plan due to a lack of detail and a poor record on meeting targets together with staff disquiet at the prospect of thousands of job cuts heaped pressure on the duo.
At the bank’s annual shareholder meeting two weeks ago, 39 percent of the capital represented voted against the management board and some investors called for Jain and Fitschen to go.
Deutsche Bank has pledged to give more detail about its strategic revamp at the end of next month and some investors were hopeful that Cryan, who helped steer Swiss bank UBS through the financial crisis, would be able to take more radical action than Jain, a former investment banker who wanted Deutsche Bank to be Europe’s answer to Goldman Sachs.
“We believe Mr Cryan will be able to review the size and scale of the investment bank with a much harsher lens than Mr Jain,” Autonomous analyst Stuart Graham said. “The execution risk is higher than normal at Deutsche, but so too is the investor unhappiness. We therefore expect the shares to outperform, at least for the next few months, on the back of this cathartic management change.”
Europe’s banking elite has been roiled by the financial crisis and its aftermath as new regulations and a slew of scandals eat into profits.
Standard Chartered and Credit Suisse both have new chief executives taking over this summer, but Cryan faces the most formidable challenge.
After sticking with an expensive universal banking model during the crisis, Deutsche Bank is now trying to catch up with rivals in axing unprofitable business lines to boost earnings and shore up its balance sheet.
Deutsche’s “Strategy 2020” involves shrinking parts of its investment bank and selling off its Postbank retail unit. Jain and Fitschen had originally favored a more radical plan to get rid of Deutsche’s entire retail business and become a pure investment bank and wealth manager but they dropped it due to regulatory hurdles and opposition from Berlin, supervisor concerns and one trade union.
The restructuring plan unveiled in April is meant to boost cost savings by an annual 3.5 billion euros (US$3.9 billion) by 2020 and drive a return on tangible equity, a key measure of profitability, of at least 10 percent in the same period.
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