Near Death, Cryan's Ouster and Deutsche Bank's Decade of Crisis
(Bloomberg) -- A decade after the onslaught of the financial crisis, Deutsche Bank AG is still struggling to adapt to a new era of lower investment banking returns that has forced lenders across Europe to rethink their business models.
Germany’s biggest bank has been through three strategic overhauls in as many years and a near-death experience that saw clients pull billions in the autumn of 2016. It’s raised some 30 billion euros ($37 billion) of capital since 2010, yet has a market value of just 24.3 billion euros as investors remain doubtful the company can revive growth.
Here are some of the milestones on the bank’s troubled journey over the past six years as it sought to restructure, find the right leaders and replenish funds eroded by fines for misconduct.
Deutsche Bank names Christian Sewing as chief executive officer, replacing John Cryan, and appoints Garth Ritchie as head of the investment bank. Sewing, a 47-year-old lifelong Deutsche Bank employee who formerly oversaw operations including retail banking and wealth management, says the lender must speed up decision making and clear out unnecessary bureaucracy while regaining its “hunger” for business. Deputy CEO Marcus Schenck, who co-led the investment bank with Ritchie, will leave the company.
The leadership revamp follows weeks of press speculation over Cryan’s fate as supervisory board Chairman Paul Achleitner sought a replacement for the Briton less than three years after he took the top job.
Deutsche Bank sells shares in its asset management unit, DWS, to raise about 1.4 billion euros in an initial public offering. The shares closed below the IPO price by the second day of trading, amid generally weak market conditions.
Less than a week after the bank sounded a bullish tone in its annual report, CFO James von Moltke pours cold water on the outlook for the securities unit, still the source of most of the bank’s profits. He says at a conference that the investment bank’s revenue would probably be flat to slightly down from last year in the first quarter.
Deutsche Bank reports the lowest revenue in seven years for the fourth quarter and scraps a target for 2018 costs, adding to doubts over Cryan’s turnaround effort.
Just seven months into the the CEO’s latest plan, some investors are reportedly losing faith. Three of the largest 10 shareholders in the bank tie their continued support for Cryan to a visible turnaround within the next few quarters. Two say that an external replacement may be the best option if Cryan can’t deliver by the annual shareholder meeting in May.
The bank hires Citigroup Inc. Treasurer von Moltke to replace Schenck as chief financial officer, completing Cryan’s new management team.
Cryan unveils his second strategic overhaul in 18 months. Out goes the objective to sell Postbank, a German consumer-banking unit, which is now being combined with Deutsche Bank’s main retail operation. Cryan also reverses a decision made a year earlier to split the securities unit from the rest of the investment bank, and combines trading and investment banking. He names Schenck and Sewing as his deputies, while the bank taps shareholders for 8 billion euros by selling stock to help bolster capital and fund new business.
The lender reaches a $7.2 billion agreement to resolve a years-long U.S. investigation into its dealings in mortgage-backed securities.
When news leaks in September 2016 that the U.S. Department of Justice wants Deutsche Bank to pay $14 billion to settle the probe into its sale of toxic mortgage-backed securities, the lender suffers its worst hemorrhage of liquidity since the financial crash. At one point, private banks and money managers pull $10 billion in a single day. The shares drop to the lowest on record.
Cryan takes over as sole CEO after Juergen Fitschen’s departure.
Cryan outlines measures to lift capital by eliminating the dividend for two years and shrinking assets, while lowering costs. What he doesn’t provide is a path to growth as he scales back the investment bank and sheds businesses, leaving investors cold.
Anshu Jain, who helped build Deutsche Bank into a fixed-income powerhouse in two decades at the company, steps down as co-CEO just two months after unveiling a new strategy. He’s replaced by Cryan, the former finance chief at UBS Group AG and a Deutsche Bank supervisory board member. Co-CEO Fitschen announces that he will step down the following year.
The departures come after the managers struggled to adapt to toughening rules that made some trading activities less profitable, while dealing with a barrage of legal issues. At the bank’s previous annual shareholder meeting in May, the top managers receive the lowest approval from shareholders in at least a decade.
Jain and Fitschen announce a plan to cut back the number of countries where the bank operates while boosting spending in its asset, wealth-management and transaction banking operations. The plan also includes cutting the ownership in the Postbank consumer unit to a minority stake.
Deutsche Bank stops short of a more radical overhaul that would have seen a complete exit from consumer banking after that option didn’t win backing from the board, people with knowledge of the discussions said at the time.
Jain and Fitschen hire Schenck from Goldman Sachs Group Inc., where he is a partner, to become CFO.
Deutsche Bank raises 8 billion euros selling shares to replenish capital.
The bank posts a surprise loss for the fourth-quarter of 2013 as it sets aside additional funds to meet mounting litigation-related expenses and reorganization costs.
Deutsche Bank reverses course and seeks 5 billion euros from investors to increase capital just three months after Jain said a stock sale wasn’t in investors’ interest.
At the annual shareholder meeting, investors call on Achleitner to improve corporate governance to allow Deutsche Bank management to focus on boosting shareholder returns.
Jain and Fitschen pledge to cut jobs, slash costs and review pay practices to boost profitability amid higher capital requirements, setting a target for after-tax return on equity of 12 percent by 2015 -- a goal that proved to be far out of reach.
Jain and Fitschen assume leadership as co-CEOs, replacing Josef Ackermann, who helped build Deutsche Bank into Europe’s largest investment bank during a 10-year tenure that spanned the boom years of the early-to-mid 2000s and the financial crisis that followed.
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