LondonCultural change begins at the top – that seems to be the message that Deutsche Bank has reluctantly accepted on Sunday when its overseers appointed John Cryan, a British banker, to succeed Anshu Jain and Jürgen Fitschen as the bank’s chief executive.
Independent, detail-oriented and calm under pressure, as well as introverted, shy and maybe a bit boring, is how investors and some acquaintances described the U.K. national charged with pulling Germany’s largest bank out of its post-financial crisis slump.
In many ways, Mr. Cryan is the antithesis of one of the men he will be replacing, Mr. Jain, who made a career as a flamboyant investment banker in London, embodying the generation of go-go bankers whose actions led collectively to the 2008 financial crisis.
By contrast, Mr. Cryan – a consultant rather than investment banker by trade – remains relatively untarnished by the excesses and hubris that characterized Wall Street and London for much of the early 2000s.
Instead, he quietly built a reputation as something of a turnaround specialist.
Mr. Cryan has one other edge over the Indian-British national Mr. Jain: He speaks German, the result of spending a few years as a banking consultant in Munich early in his career.
“I know of nobody else who works problems and solutions with such a love of detail, coolness, precision and long-term perspective…and who sticks to his principles even under pressure,” said one top manager at a financial competitor, who has worked with Mr. Cryan in the past but declined to be named.
Deutsche Bank could use a bit of boring after years of tumult. That at least seems to be the view of the investors and shareholders, who helped topple the bank’s current leadership duo by revolting at an annual meeting earlier this year.
The bank’s share price rose more than 8 percent in Monday morning trading, the most in two years, before falling back slightly in the following hours. At 11:30 central European time, the share price remained up more than 5 percent on the day.
"It marks a very big chance for Deutsche Bank to end all discussions and problems with one strike," said Martin Stürner, head of Frankfurt-based investment fund PEH Wertpapier. "The bank has potential, its stock is undervalued, trading below its book value. We will think about additional purchases on Monday."
Deutsche Bank announced the dramatic change Sunday afternoon – a surprise announcement after it had seemed like Mr. Jain and his co-CEO Jürgen Fitschen had initially weathered the storm.
Mr. Cryan will start his job as chief executive in July, replacing Mr. Jain. Jürgen Fitschen, who has been running the bank together with Mr. Jain since June 2012, will remain as co-CEO for another year to help smooth the transition. After that, Mr. Cryan will run the bank on his own.
Like any politician entering office, Mr. Cryan can expect something of a honeymoon period as he becomes acquainted with the problems facing the bank. But it’s not likely to last very long – the laundry list of problems facing the bank is too long.
One of the five largest investment banks in the world, Deutsche Bank has long lagged behind many of its peers in terms of profitability. It is also considered more risky – its leverage ratio, a measure of assets compared to outstanding loans, is well below the average of major banks (see graphic).
“This is less about the heads of the bank than it is about the business model, and the current business models of most European big banks is not sustainable over the long term,” said Philipp Vorndran, capital market strategist for asset manager Flossbach von Storch. “I can imagine that Deutsche Bank’s share price will jump on Monday – but that doesn’t change the fundamental problems.”
The bank also remains burdened by thousands of lawsuits and regulatory investigations pertaining to wrongdoing in the run-up to the 2008 crisis. While Mr. Jain and Mr. Fitschen also only took over after the crisis, it was their long careers at Deutsche Bank and ties to a number of the legal transgressions that ultimately proved their undoing.
“The current heads were too strongly connected to the problems of the past to credibly stand for a new culture,” said Gerhard Schick, a spokesman on financial matters for the Greens, told Handelsblatt. “This fresh start would have best been already been started after the departure of Josef Ackermann… the new board must now clean house, especially in investment banking.”
The fact that these legal troubles will continue to be a burden was brought home this weekend. News of Mr. Cryan’s appointment was paired with revelations that Deutsche Bank could face yet another investigation by regulators – this time for an alleged money laundering ring between Russia and Britain.