Thousands of jobs gone, no dividends, billions in losses: There's no shortage of bad news from Deutsche Bank these days. DW's Henrik Böhme thinks it'll stay that way for quite a while.
If a publicly traded corporation must announce bad news, there are two alternative tactics it can put in play. One is the salami-slice method, in which bad news is released a little at a time, in thin slices that won't scare investors. The other is the hammer-drop method: Release it all at once, batten down the hatches, and wait for the resulting intense but hopefully brief storm to pass.
Unfortunately for Deutsche Bank, so many problems have accumulated that the salami-slice method is really the only option at this point, and some of the slices are pretty darn thick.
When Deutsche's new CEO, British banker John Cryan, took the helm at the giant bank this past summer, it quickly became clear that he intended to apply a vigorous broom as he set about detoxifying the ship. Cryan needed to make a clean break with the past - something his predecessor Anshu Jain, who had been at the bank in senior roles while a lot of its current problems were being generated, had proven unable to do.
Cryan had been on the bank's board of directors for a couple of years before becoming CEO, and so he knew it wasn't going to be feasible to steer the bank back into calm waters by making a couple of minor course corrections. Big changes were needed.
Blow upon blow
For a while after Cryan took the helm, little was heard out of the twin towers of Deutsche's headquarters in Frankfurt's banking district. Then suddenly things became rather noisy: A din of metaphorical hammer-blows rang out, and occasionally, the heavy thump of a wrecking-ball. It became clear that Cryan intended his restructuring of the bank to be abrupt and comprehensive rather then gradual or gentle.
The result: Six billion euros of losses in a single quarter, a new record and a shock for investors. But that was only the beginning. Next, Cryan set about pruning the bank's lines of business - and replacing senior executives. Everyone in the C-suite who had been to any degree associated, even indirectly, with the scandals of the past was handed their hat and coat and bid goodbye.
The bank's businesses were restructured to improve transparency. One was pruned back: Investment banking, the business that had been a cash-cow for the bank for many years under its chief, Anshu Jain. The problem was that the cash pouring from the cow had often been milked using very dodgy means. Deutsche's history of investment-banking malfeasance promises to remain a gushing source of financial, legal and reputational risks for a long time to come.
For the investors, Cryan offered bitter pills. They've been told not to expect any dividends in the coming two years - the bank needs to husband its operating profits for other uses. Among other things, it will cost money to fulfill the increased reporting requirements imposed by regulators in the wake of the many revelations of scandalous practices at Deutsche that have emerged over the past few years. The regulators will keep the bank on their radar screen, and for many a good reason.
That sounds like a pretty punishing set of salami-slices, but anyone who imagines that's all Cryan has on his list of planned changes would be underestimating him. It turns out Cryan's house-cleaning of C-suite personnel was just foreplay. That done, he put on his wrecking-ball operator's hardhat and set about laying off thousands of people at all levels, clear across the bank's various lines of business.
Progress, but no guarantee of success
Cryan's first few months in office have been a bracing start, but more will be asked of him than broom-wielding and wrecking-ball operations. Cryan must next show that he is an architect and builder as well - because the giant bank he has been entrusted with guiding needs rebuilding.
The renovation plan is already on the table; it was written under the leadership of Cryan's predecessors, Anshu Jain and Jürgen Fitschen, in the several months before he took the helm, on the basis of extensive consultations within the bank's senior ranks. Cryan was among those who provided input, in his previous role on the board of directors.
Its rather anodyne title: "Strategy 2020". Jain and Fitschen didn't convert much of it into reality - it appears they were too much insiders, too connected to the bank's past, to make a clean break with it.
This week, Cryan gave his first press conference since he took the helm at Deutsche. He came close to apologizing for not previously having hosted the press - there had been so much to do, he said in English-inflected but comprehensible German. Then he outlined his view that the bank must become less complex and more efficient.
Cryan's press conference showed a man who sees his new role as that of an honest broker, a renovator tasked with building a better Deutsche Bank. His style was very different from that of his immediate predecessor. When Anshu Jain, who had been the bank's long-time head of investment banking before becoming co-CEO, had faced the press, he grandly claimed to have known nothing of the scams and dodgy dealings perpetrated by his long-time subordinates - a crew of investment bankers so devoted to their chief that they were known as "Anshu's Army."
Cryan, in contrast, spoke to reporters in the plain, unpretentious manner of a foreman setting about a job. If he is to succeed in his mission to renovate the bank, that's probably best. After all, it isn't only the analysts, investors and shareholders he needs to convince of his reconstruction agenda; he also needs to have the bank's employees with him, his team, the crew of which he is the foreman. That will be his foremost challenge.
More trouble coming
There is no guarantee Cryan will succeed in his mission. Already, new storm-clouds are gathering over Deutsche's twin towers. This time they're being carried in by a cold wind from Russia, where the bank is alleged to have been involved in large-scale money-laundering, helping Russian clients evade capital controls to convert rubles into dollars and get money out of the country. It's also been alleged that Deutsche's bankers contravened Western sanctions that had been imposed against doing business with certain associates of Vladimir Putin's, imposed by the US, Germany and other Western governments in the wake of their confrontation with Moscow over Ukraine.
American regulators are on the case. If the allegations are shown to be valid, then stiff fines are likely to be imposed, and Deutsche could end up having to take another heavy hit on its balance sheet. The money the bank has set aside for settling legal claims so far would likely prove insufficient.
No-one should envy John Cryan his job. For every rotting plank he replaces in the big ship he is now the captain of in an effort to stop it leaking money, another plank cracks and another leak springs into being. Meanwhile, not a few Germans have taken to wondering if that's a black-red-gold flag flying from the topmast, or a Jolly Roger. Perhaps the bank's new slogan should be "Deutsche Bank - the excitement continues!"
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