- Top 20 shareholder sees ‘mismanagement’ by previous executives
- Cryan should clean up balance sheet further, Speich tells AGM
Deutsche Bank AG co-Chief Executive Officer John Cryan is the “right man” to shrink the balance sheet further and end a series of compliance issues that have sapped earnings, one of the bank’s top 20 shareholders said.
“Deutsche Bank is a restructuring case after a decade of mismanagement,” Ingo Speich, a fund manager at Union Investment, said in a copy of a speech prepared for Deutsche Bank’s annual shareholder meeting in Frankfurt on Thursday. “You must tackle the work your predecessors didn’t, clean up the balance sheet further and finally put an end to the legal risks.”
Deutsche Bank has racked up 12.6 billion euros ($14 billion) of legal costs and provisions since 2012, the most of any bank in continental Europe, eroding earnings at a time when regulators are demanding higher capital buffers. Since taking over from Anshu Jain in July, Cryan has announced plans to eliminate thousands of jobs, scrap dividends and scale back the debt-trading empire built by his predecessor to restore investor confidence.
“At the end of the day, there’s no other way for Deutsche Bank than to shrink itself back to health,” Speich said, citing pressures from negative interest rates, a drop in oil prices and declining revenues in the capital markets business.
The shares have dropped about 35 percent this year, giving the bank the lowest price-to-book ratio among the world’s ten largest investment banks.
Deutsche Bank has been “badly managed on an operative basis” with “insufficient” internal controls, according to Speich. It’s up to Cryan to “pick up the pieces,” while supervisory board Chairman Paul Achleitner deserves praise for appointing him as co-CEO, he said.
Still, the chairman should have prevented a dispute on the board that emerged last month, according to the fund manager. Georg Thoma, a director who oversaw a committee probing wrongdoing, resigned last month after deputy Chairman Alfred Herling accused him of being “overzealous.”
“Your ability as a tough overhaul expert, as already proven at UBS, is exactly what Deutsche Bank needs right now,” Speich said, referring to Cryan’s previous role as chief financial officer of UBS Group AG. “But a restructuring alone doesn’t really help the stock. Once there’s eventually light at the end of the tunnel, we expect strategic impulses to develop the bank further.”