Deutsche Bank

A Cryan Shame

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Time is running out for John Cryan.
  • Why it matters

    Why it matters

    If Mr. Cryan’s plans fail to show results in the next few months, Deutsche Bank may be forced into a painful capital increase by the end of the year.

  • Facts

    Facts

    • There is widespread agreement that Mr. Cryan is taking the right approach at Deutsche Bank.
    • But the bank’s share price has declined by almost half since he took over in June.
    • Deutsche Bank has lost both employees and market share as a result of its poor performance.
  • Audio

    Audio

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According to John Cryan, Deutsche Bank needs three things at the moment: Time, determination and patience. With these words, the co-chief of Germany’s largest bank asked the sorely afflicted employees and shareholders for yet another leap of faith on Thursday.

Hardly anyone doubts that Mr. Cryan is deeply determined. And it is virtually undisputed among investors, employees and rivals that he is taking the right steps and pressing forward rapidly with his uncompromising restructuring of the bank, accelerated processing of legal disputes and investments in an aging and too complex IT system.

What Mr. Cryan, a Briton, and his brand-new management team may be lacking is time. Investors and employees are apparently unwilling to give management much more of it.

For Mr. Cryan, it is as if he were riding a bicycle with two flat tires and a broken chain toward a hurricane.

The share price is a dramatic reflection of investor impatience. It has fallen by almost half since Mr. Cryan took office, and by more than a quarter in the first few weeks of this year alone. In other words, investors are abandoning Deutsche Bank in droves.

It’s a similar story with employees. A few of Deutsche Bank’s top bankers are not prepared to accompany Mr. Cryan through at least two tough years of “blood, sweat and tears.”

The consequences are already palpable in the investment bank, where Deutsche Bank lost an astonishing amount of market share in the fourth quarter, especially in the strategically important equities and consulting business. This is partly the result of an exodus of employees, which will only be exacerbated in the spring, a traditional time to change jobs, after bonuses have been paid.

Time is also working against Mr. Cryan, who has taken on the herculean task of cleaning up what has probably been the most poorly managed major international bank in recent years.

Both the economic signs and turbulence in the financial markets do not bode well for the banking industry as a whole. Lenders can expect to see declining revenues, a rise in loan defaults and greater risks – which is why many investors wouldn’t touch banks with a ten-foot pole at the moment.

 

Deutsche Bank Takes Its Losses-01

 

These problems affect the industry as a whole. But for Mr. Cryan, it is as if he were riding a bicycle with two flat tires and a broken chain toward a hurricane taking shape on the horizon. If the world economy does not settle down again – which, unfortunately, is unlikely – the bank will be severely weakened and slide into the next industry crisis with substantial burdens, such as legal costs that remain high.

Then not even Mr. Cryan’s great determination will enable the bank to avoid a capital increase by the end of the year, a move it has rejected until now.

 

To contact the author: d.schaefer@handelsblatt.com

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