John Cryan im Interview: „I think technology will completely transform our industry“

Frankfurt Vor zwei Jahren übernahm der Brite den Chefposten der Deutschen Bank. In Deutschland ist John Cryan längst angekommen, auch wenn er längere Interviews lieber noch in Englisch gibt. Der Vorstandschef bewundert den Reformwillen vieler deutscher Unternehmen, von denen viele auch vor radikalen Maßnahmen nicht zurückschrecken, um fit für die Digitalisierung zu werden.

John, at the beginning of your term you once said: „The perception seems to be that I’m doing all the clean-up and never have fun.“ Are you having more fun today?
I am allowed to say that it is fun sometimes, even if there is still a lot to do. But the truth is that it is a tremendous privilege being in this role. 

In the political world there are a lot of tensions due to events like Brexit, several wars in the Middle East, the Trump presidency and rising populism. Could all these affect the financial industry?
Normally the technical answer would be: Yes, very much. But the interesting thing about the markets of today is that they only seem to pay some regard to these hotspots, but not too much. We are seeing very high asset prices in nearly all asset categories. Volatility is the main outlier because it is remarkably cheap. But most other asset classes in the Western world are potentially overbought, in some markets I see potential bubbles.

So we are living in the best world money can buy?
Uncertainty is not new to the world. At the start of the year markets were concerned about the political uncertainty in Europe. Now those uncertainties seem to dissipate and markets are much more comfortable with the euro and the euro zone. This withdrawal of concern about Europe has certainly improved market confidence and the markets have responded positively. No doubt about it.

Isn’t the market confidence mainly driven by monetary decisions of ECB President Mario Draghi? The S&P 500 increased by 250 percent since Lehman, the DAX is 150 percent higher. Should we expect more? Should we be scared about it or both?
Maybe a little bit of both is true. It is always good in the markets to be a little bit sceptical. There is no doubt that cheap money has contributed to asset prices going up. That was Draghi’s intention. It helps business confidence and it has helped a number of borrowers through a difficult period. So it has been successful in this regard. But now the price of the euro is reflecting two factors: An improved confidence in the economy of the euro zone and also a certain degree of anticipation of a gradual change in the interest rate policy. Because an increase in the interest rates in the euro zone would generally strengthen the value of the euro.

You were talking about bubbles. In which markets do you see bubbles?
There is a lot of money in the world, looking for a home. People give it to fund managers for making a yield. And so fund managers look for yields. In many asset classes they can’t find them. Japanese bonds with 10 years to maturity are still negative, for example. So they look for higher risk assets.

Would you buy Italian government bonds, by the way?
I never give investment advice. I never invest myself, because from compliance purposes it is easier not to. 

Have markets moved up the risk curve?
The areas where I would be cautious are at the higher-risk end of the market. I don’t think that you get the right reward for the risk you are taking right now. So in some of the riskier credit markets, not only but also in the US, I think I would be much more cautious about investing.

We all learned at university that interest rates are key to all prices in financial markets. So what happens if the key price is wrong?
Well, wrong is relative.

But people and institutions who are successful and wealthy and put aside money are getting punished. For them the price signal is definitely wrong.
The intervention by central banks has been deliberately done to modify asset prices. The rational is to direct investment decisions to places where investments are more needed.

Also banks that successfully attract deposits are punished.
We are also a bank with more cash than we know what to do with. So we do have to store some – and it keeps coming. Actually we are paying for clients’ inflows by charging nothing to them, while we have to pay 40 basis points when we take it to the central bank. That could not be sustainable.

So are you asking for a change in the direction of monetary policy?
Yes, because I think the benefits of those negative interest rates have been recognized and achieved – and it can’t be forever that deposit taking is a loss-making adventure for banks. Unless we adapt a new world where there is no time value of money, and holding money means that you are intrinsically losing money. We could adapt to a world like that. But if you hold money in dollars, for example, it increases in value. Not with respect to inflation, but at least it goes up nominally in value. In euros it goes down the alley. 

So what is your conclusion?
My argument is that it can’t last forever, there must be an end. And given the increased confidence in the euro and the real economy, the market is expecting an increase in interest rates, so a reduction in the negative nature of interest rates. 

Definitely the market is asking for and expecting something. So the clock is ticking. But does Mario Draghi listen to the clock, or is he living in a different time zone?
I think he is extremely well-advised. There are a lot of criticisms about his policy, coming from our house and others. But I think it’s achieved a positive effect. But I think no central banker thinks that permanent negative interest rates are the right solutions.

So it’s time for a change now?
I am only raising the question: Is now the right time to change when the market is anticipating it? Why not give the market a little bit? And then try a little bit more? I am very gentle in that.

Your employees know that if the big boss is asking questions, they’re not really questions.
There is a thesis behind the question, but in a polite way. I am English. The English are polite.

Monetary policy is not the only challenge. Another is technology. What role will technology play in the ongoing transformation of your industry?
I think technology will completely transform our industry. It might be within five years before banks look unrecognizable compared with how they looked like in the past. In retail and private banking I see banking within five to ten years embedded in people’s digital identity. The pace is developing fast. I think the world will continue to change, the pace of change will increase, younger people will not recognize the need for a traditional bank and we have to adopt new technologies and adapt to the new ways of working and if we don’t, we will be left behind.

Just an idea: Should we invite new competitors to our next banking conference – companies like Google or Apple?
That would be a good idea, Amazon is a very good example or Paypal, which is a great partner of ours. At the moment regulation is drawing a line in the sand, which decides which part of the business we cover and which part they cover. We work extremely well together. The question is, will that break down over time? Which effect will some of the regulation have that will be introduced in Europe, for example the payment services directive. It’s a directive from the EU, which requires banks to subordinate themselves to other payment platforms. For example we have to insure payments on behalf of these competitors. These changes mean we have to adapt to the new world even faster.

Where do you see future competitors, who will disrupt the banking industry like Google or Tesla are trying to disrupt the car industry?
One of the things we’re doing is supporting commerce, so Amazon would be a natural competitor, a company that is very successful in disrupting commerce. Places where people have their digital identity would be another example, like Facebook. Those potential competitors could embed banking services into their business model.

What will digitalization mean for employees, not only your employees but for all employees in the banking industry?
The jobs will change. We have to find new ways to employ people. And maybe people have to find new ways of spending their time, because it won‘t be necessarily be in traditional full-time employment. But the sad truth for the banking industry is, we won‘t need as many people as today. In our bank we have people doing work like robots. Tomorrow we will have robots behaving like people. It doesn’t matter if we as a bank will participate in these changes or not, it is going to happen.

About how many jobs are we talking here – half of the workforce?
I know you want a headline, but it will be a big number definitely.

This is not about headlines, if people don’t know how serious the changes ahead will be, they will be even more scared.
I‘ll tell our people that the quality of their jobs could improve. If you take an accountant at the bank, a large part of their job is to produce numbers. It takes them three to four weeks to produce an account and then they move to the next one. Wouldn’t it be great, if machines could produce those numbers in just a few hours? Then accountants could analyse the numbers, form valid opinions what those numbers mean and not just produce them. Digitalization also means upscaling jobs.

What do you think about the German attitude towards technology, are we too afraid?
I’ve met companies in Germany who are ready to sacrifice half of their revenues, because they are moving out of old businesses and into new ones like software or technology. That means that they will have to sell businesses their founder once developed. I visited one of those traditional companies and came out of one of those meetings thinking, we need this kind of thinking in the banking industry. We need to admit, what we had might have been nice, but it‘s not necessarily fit for the future anymore. We need that revolutionary spirit.

Before the financial crisis, bankers were called the „Masters of the Universe.“ Do you and your colleagues have to become „Masters of Transformation“?
Maybe we don’t have to become Masters, but we have to watch out that we won’t be mastered. We will have to meet these developments head on and not worry about revolutionary changes. Your sector, the media for example, has been revolutionized by the iPad. I haven‘t touched a newspaper in years. But I read more media than ever before.

That’s exactly what’s going on in the media sector. It‘s not about the iPad, it‘s about changing habits of readers and users. One last question. Please complete this sentence: A good leader in times of change has to....

.....to be able to convince people to do something they otherwise wouldn’t do.

John, thank you for this conversation.