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CEO change of little use in Deutsche Bank's 'restructuring saga,' analysts say


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CEO change of little use in Deutsche Bank's 'restructuring saga,' analysts say

Replacing CEO John Cryan is unlikely to change a lot for Deutsche Bank AG, which still needs to complete a strategic overhaul that has been ongoing since long before he joined, according to analysts.

Cryan's potential dismissal was brought up again in a March 27 report by The Times, which suggested the lender is looking for a new CEO as tensions between Cryan and Chairman Paul Achleitner continue to escalate. Reuters and Bloomberg also said the group is considering a CEO change, with Achleitner reportedly already meeting potential candidates.

'Not Cryan's fault'

Suggestions that there is an internal conflict at Deutsche Bank and pressure on Cryan from major shareholders over the slow progress of its restructuring emerged in October 2017. Cryan himself has stated he has no plans "to go anywhere" and is committed to completing the five-year restructuring plan he has spearheaded since late 2015. Still, pressure on him has been growing as Deutsche Bank's financial performance especially revenues at the key investment banking unit — continues to disappoint the markets.

According to The Times, Cryan and Deutsche Bank CFO James von Moltke have been at odds with the executive board over a "more radical restructuring" of the group and the investment banking unit in particular. A dispute between Achleitner and Cryan about a potential reduction of the investment banking business ended in a stalemate, according to the report.

Yet dismissing Cryan — who has been with Deutsche Bank for less than three years would hardly make the ongoing restructuring any easier or less time-consuming, according to analysts.

"Both the board and the executives are having a very difficult time to assess Deutsche Bank's quickly changing competitive landscape, combined with inherent developing stress situations," Carlo Besenius, CEO of New York-based Creative Global Investments, said in an email.

He added that the German group has been caught in a "forever ongoing restructuring saga" since Rolf Breuer was CEO between 1997 and 2002. One problem has been the "too many changes at the helm," with each board having to tackle "the immense complexity between damage discovery, damage control, reissuing a new business plan and sticking to the execution of that plan," Besenius wrote.

Cryan is Deutsche Bank's fourth CEO since 2002 and inherited a restructuring plan that was adjusted shortly after he became CEO and was amended once again in early 2017.

"Where Deutsche Bank is right now, is not John Cryan's fault — he already had a massive problem at this asset," Derya Guzel, an equity analyst with Morningstar, said in an interview.

In fact, Cryan has done very well with Deutsche Bank's revamp, Guzel argued, saying he completed several key goals of the latest restructuring plan by successfully settling a $7.2 billion litigation case in the U.S. over the misselling of mortgage-backed securities in late 2016, leading a €8 billion capital raise in early 2017 and completing the planned partial initial public offering of Deutsche Bank's asset management unit DWS earlier this month.

Guzel and Besenius both said Cryan's dismissal would be unlikely to lead to any big changes in Deutsche Bank's corporate strategy.

Meanwhile, Neil Smith, an equity analyst at Bankhaus Lampe, said in an email: "I believe John Cryan is executing the strategy according to plan and do not see what benefit a change in CEO would achieve."

'So much negativity'

Despite his achievements at the bank, there is a possibility that Cryan could eventually leave in case the chairman and the bigger shareholders are indeed unhappy, according to Guzel.

"So much negativity has been created around John Cryan that now people think that it would be better if he goes," she said.

Apart from external candidates such as Richard Gnodde, vice chairman of Goldman Sachs Group Inc., UniCredit SpA's CEO Jean Pierre Mustier and Standard Chartered PLC's Chief Executive Bill Winters, Deutsche Bank is reportedly looking at internal candidates, too. Marcus Schenck, who was Deutsche Bank's CFO until April 2017 and now co-heads the group's corporate and investment banking division, is seen as a strong candidate, according to The Times.