By Eyk Henning
FRANKFURT--Deutsche Bank AG's incoming co-Chief Executive John
Cryan on Wednesday said he is committed to simplifying the bank and
narrowing the scope of it's operations, as he postponed a detailed
presentation of the giant German lender's new strategy until the
end of October.
"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, setting the stage for potentially deep staff cuts and an
increased focus on changing the business's corporate culture.
The former UBS finance chief began his tenure as the new co-CEO
alongside Jürgen Fitschen on Wednesday. He replaces Anshu Jain who
stepped down last month amid criticism from regulators and
investors. Mr. Jain's departure was first reported by The Wall
Street Journal.
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,
which some complained lacked detail when first announced.
"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 rivals in terms of profitability and
share price since Mr. Jain and Mr. Fitschen took the helm in
mid-2012, as they grappled with a series of costly lawsuits and
attempted to lower costs.
Addressing staff on his first day on the job, Mr. Cryan conceded
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 is focused on revamping its corporate culture
after shelling 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 rates, or Libor.
One of Mr. Cryan's tasks will be to mitigate the bank's
contentious relationship with regulators. A person familiar with
conversations between Deutsche Bank and German 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 reported previously.
Deutsche Bank officials have repeatedly said regulators did not
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
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 the profitability
gap with rivals. Mr. Cryan, 54, is expected to accelerate EUR3.5
billion in announced cost cuts that the bank wanted to achieve by
2020.
The Brit has a reputation for trimming costs. At UBS, the
overhaul he orchestrated cut operating costs 22% between 2008 and
2011, mainly by cutting back on fixed-income trading that lacked
the scale of its larger rivals. At the same time, head count fell
roughly 17%.
On Wednesday, Mr. Cryan hinted he would scale back Deutsche
Bank's securities and derivatives trading business, which 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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