- Serra says next ‘dead man walking’ CEO to be known by December
- Algebris’ Serra, past Deutsche Bank critic, runs $4.3 billion
Deutsche Bank AG Chief Executive Officer John Cryan and his counterpart at Credit Suisse Group AG, Tidjane Thiam, are both at risk of losing investor confidence as they struggle to cut costs and restructure their banks, said Davide Serra, founder of Algebris Investments LLP.
“The next dead man walking we’ll see by December,” Serra said in an interview with Erik Schatzker on Bloomberg Television on Thursday. “Both John Cryan and Tidjane Thiam, if within 12 months they haven’t delivered, I think investors will throw in the towel. A restructuring of such a proportion needs 24 months -- you can’t change the surgeon in open-heart surgery.”
Both Thiam and Cryan have announced a string of measures to shore up profitability since taking on their respective roles in 2015. While Credit Suisse is eliminating thousands of jobs and shrinking the securities unit to focus on wealth management, Deutsche Bank has scrapped dividends and earmarked businesses for sale. Both banks are among the worst performers in Europe this year.
Algebris focuses on the financial sector and has about $4.3 billion in assets under management, according to its website. Serra, a past critic of former Deutsche Bank co-CEO Anshu Jain’s strategies, said he doesn’t own shares in the two banks.
Cryan last year replaced Jain, who stepped down as co-CEO after he and Juergen Fitschen received the lowest approval rating in at least a decade in a vote at the annual general meeting. Fitschen left his post last month, leaving Cryan as sole CEO.
Deutsche Bank fell 1.7 percent in Frankfurt, while Credit Suisse slid 2.7 percent in Zurich. The lenders have lost 35 percent and 42 percent respectively this year, while the Bloomberg Europe Banks and Financial Services Index is down 21 percent.
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Serra said that while he expects Deutsche Bank’s revenue base to shrink by 10 percent to 20 percent -- with Cryan cutting “fat and excess” and settling legal issues -- Thiam’s task is “a bit more challenging” as he shrinks the investment bank.
“In Europe, who’s getting it right?” he said. “It’s UBS, BNP Paribas, Societe Generale, Santander, Lloyds, Intesa -- these are the ones implementing a Wells Fargo-JPMorgan approach.”
Deutsche Bank will eventually “be a third smaller than today,” Serra said. “It won’t make much money. But ultimately it has German customers, German corporates as key clients so will be able to survive and do well.”