By Eyk Henning
FRANKFURT--Deutsche Bank's incoming co-chief executive officer,
John Cryan, foreshadowed a time of deep change for the lender,
saying he is committed to simplifying the firm and narrowing the
scope of its operations.
"I am not going to tell you that all will be sweetness and light
in the coming months," he said in a letter posted on the bank's
website on Wednesday, setting the stage for potentially deep staff
cuts and an increased focus on changing the business's corporate
culture. Mr. Cryan said a detailed presentation on the German
lenders' new strategy, originally slated for this month, will be
postponed until the end of October.
The former UBS finance chief began his tenure as the new co-CEO
alongside Jürgen Fitschen on Wednesday. He succeeds Anshu Jain who
stepped down last month amid criticism from regulators and
investors.
Mr. Cryan on Wednesday stressed his commitment to the
cornerstones of a new strategy announced by the bank in April,
which included plans to shed its Postbank AG retail banking
business, but said he would take the summer and fall to examine how
to cut costs and other details of the plan. The presentation was
previously slated for this month.
The strategy aims to streamline the German lender and boost
profitability, but stops short of a radical plan to split
investment banking and retail operations into separate companies.
Investors were keenly awaiting Mr. Cryan's take on the strategy.
When it was announced, some complained that the plan lacked
detail.
"It is the right to take the time until autumn to work on the
details of the strategy," said Helmut Hipper, fund manager at Union
Investment, one of Deutsche Bank's top 20 investors. Mr. Hipper
said the strategy must begin taking shape.
Deutsche Bank has trailed behind its rivals in terms of
profitability and share price since Mr. Jain and Mr. Fitschen took
the helm in mid-2012. The two grappled with a series of costly
lawsuits and attempted to lower costs.
Addressing staff on his first day on the job, Mr. Cryan said
that the reputation of Germany's largest lender has been "damaged
by instances of serious misconduct." Heavy fines for settling
lawsuits "have strained our capital...and will likely continue to
do so for some time," he said.
"No one can promise that we will never again make a mistake, but
I can tell you that we will decisively identify problems, apply
fixes and hold accountable those who misbehave," Mr. Cryan
said.
Deutsche Bank shelled out around EUR9 billion ($10.04 billion)
over the past three years to settle lawsuits and regulatory
investigations, most of which stem from the investment bank Mr.
Jain once ran. Deutsche Bank paid a record $2.5 billion fine to
settle U.K. and U.S. investigations into the manipulation of the
London interbank offered rate, or Libor.
One of Mr. Cryan's tasks will be to improve the bank's
contentious relationship with regulators. A person familiar with
conversations between Deutsche Bank and Germany's banking
regulator, BaFin, said the agency has been critical of Mr. Jain,
pointing to a recent confidential report on attempts by Deutsche
Bank traders to manipulate Libor. Although the report said no
executives were involved, BaFin noted that Mr. Jain was head of the
investment bank and therefore "ultimately responsible for the
missteps," the Journal has reported.
Deutsche Bank officials have repeatedly said regulators didn't
pressure Mr. Jain to step down. BaFin's top supervisor, Felix
Hufeld, on Monday declined to say if the watchdog pressed him to
leave. Asked how BaFin would encourage a management change, Mr.
Hufeld said it "informally communicates [that to a bank]. And then
we wait and see what happens." He said Deutsche Bank has to improve
its internal processes and culture, and wished Mr. Cryan well.
Despite the fuss, Mr. Jain will remain a consultant to Deutsche
Bank for another six months as planned, people familiar with the
matter said.
Messrs. Jain and Fitschen received what amounted to a vote of no
confidence at the bank's annual meeting several weeks ago.
Commenting on Mr. Jain's departure, supervisory board Chairman Paul
Achleitner said in an email to the Wall Street Journal that the
move "to restructure the bank and the management were the logical
consequence of the new strategy previously announced."
Mr. Cryan now hopes to open a new chapter for Deutsche Bank. A
top priority is making deep cost cuts to close a gap in
profitability between the bank and its rivals. Mr. Cryan, 54 years
old, is expected to speed up EUR3.5 billion in costs cuts the bank
has said it wanted to achieve by 2020.
The co-CEO, who is British. has a reputation for trimming costs.
At UBS, an overhaul he orchestrated cut operating costs 22% between
2008 and 2011, mainly by cutting back on a fixed-income trading
operation that lacked the scale of its larger rivals. At the same
time, head count fell by roughly 17%.
On Wednesday, Mr. Cryan hinted he would scale back Deutsche
Bank's securities and derivatives-trading business, which he said
are "heavily reliant on long-term balance sheet usage."
He also suggested he will strengthen the bank's more stable
sources of income, including investment-banking advisory services,
transaction banking, and retail and asset and wealth management
operations.
Hans Bentzien
contributed to this article.
Write to Eyk Henning at eyk.henning@wsj.com and Sarah Sloat at
sarah.sloat@wsj.com
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