A British national is leading Germany's biggest bank. John Cryan, a former senior executive at UBS, succeeds co-CEOs Anshu Jain and Jürgen Fitschen who failed to regain shareholders' trust amid various scandals.
While investment banker Jain has left Deutsche Bank, co-CEO Jürgen Fitschen remains in office for another year to ensure a smooth transition. Together, they oversaw the operations of Germany's most important bank since 2012. But they failed to live up to expectations. Rather than deliver on the much anticipated culture change, nothing has changed. Profits were minuscule, numerous fines and court cases have tarnished the bank's reputation.
When shareholders expressed their lack of confidence in Jain and Fitschen at the general meeting this May, chairman of the board Paul Achleitner had to act. He introduced John Cryan (see picture) as new co-CEO and announced that he would progress to become the bank's sole director by May 2016. Serious challenges now lie ahead of Cryan.
"Cryan must regain the investor's trust, devise a new strategy, and bring calm to Deutsche Bank," says Helmut Hipper, who manages Union Investment's portfolio. It is one of the biggest shareholders in Deutsche Bank.
Climbing up the job ladder
It may prove beneficial that Cryan has no prior links to Deutsche Bank and can therefore execute his reforms without having to coordinate them with the bank's informal hierarchies. The 54 year old Cambridge graduate began his career as an accountant with Arthur Andersen and then moved on to London investment bank S.G. Warburg. After it was acquired by UBS, Cryan advanced to become chief financial officer at the Swiss bank during the turbulent years from 2008 to 2011.
Industry insiders report that Cryan successfully initiated a culture change during his reign at UBS. He oversaw the transition from a business model focused on fast and risky profits to a more reliable way of operating.
After falling out with the UBS CEO in 2012, Cryan moved on to direct the European section of Singapore's sovereign wealth fund Temasek Holding. From 2013 onwards he oversaw the European business section on Deutsche Bank's advisory board, led the accounting committee and contributed to the risk management board.
Audacious business models are out
Unlike his predecessor Anshu Jain, Cryan is fluent in German and known to pursue a careful, pragmatic and almost boring way of running things. "Boring is the new black," headhunter John Purcell told the BBC. According to him, Cryan is the perfect fit for Deutsche Bank.
Cryan is familiar with how Deutsche Bank operates due his experience of working on its advisory board. But this also makes him partially responsible for its desolate situation.
For instance, acting as a controller, he agreed to 'strategy 2020' which was devised as a road map for a more prosperous future for the bank. But the investors chided the plan for being overly vague.
Its core aim is to slim down: sell Postbank, close numerous branch offices, strengthen its investment banking sector. This agenda, originally announced by Jain und Fitschen, must now be implemented by Cryan. Specific details about how this will unfold and how many jobs will be cut are expected in autumn.
Cryan is faced with another challenge: his bank has to deal with a shortfall in capital. Although his predecessors have increased the amount of equity held by the bank to conform to increasingly tight regulations, billions of euros in fines, court costs and an expensive restructuring of the financial institution have put a major dent in the budget. Analysts estimate that Deutsche Bank will have to borrow up to twelve billion euros to stay afloat.
It is likely that Cryan will soon request another capital increase from investors. They will be loathe to fulfill this ask even though they secured Cryan's ascent. In turn, he will have to agree to deep cuts.
"Deutsche Bank can easily shed ten percent of its 100,000 strong workforce," one of the bank's principal institutional investors told Reuters. Cryan can hardly expect a grace period.
Meanwhile, Germany's banking supervisor Bafin has begun investigating Cryan's ascent to the helm of Deutsche Bank. Market-listed companies are required to immediately announce developments that can impact the price of its shares. This is intended to prevent insider trading.
Bafin is skeptical whether Deutsche Bank conformed to this policy with regard to Cryan's new position as CEO and doubs that "the ad-hoc notification was made in time". This is because on June 7th, the Wall Street Journal reported on the resignation of Jain und Fitschen two hours before Deutsche Bank officially announced the move.