Cryan, Thiam Earn Failing Marks One Year Into Bank Overhauls

  • Cryan scores higher on communication, Bloomberg survey finds
  • Credit Suisse’s Thiam gets better marks for strategic thinking

John Cryan and Tidjane Thiam received failing grades a year into their jobs in an informal survey of investors and analysts that reflected doubts about their ability to turn around two of Europe’s biggest banks.

Cryan, the chief executive officer of Deutsche Bank AG, was viewed more favorably than Thiam, his counterpart at Credit Suisse Group AG, winning higher marks on communication and execution, according to the June survey of 11 investors and seven analysts who follow both companies. Yet Thiam, a former McKinsey & Co. consultant, had a better score on strategic thinking.

“There’s some light, but a lot more shadow,” said Boris Boehm, who helps manage 2.2 billion euros ($2.4 billion) at Aramea Asset Management in Hamburg. “I’m not optimistic on their goals.”

The doubts are reflected in the banks’ shares, which lost more than half their value in the past 12 months, compared with the 43 percent drop in Bloomberg’s European banks index. Deutsche Bank trades at about a third of its tangible book value, meaning investors view its assets as worth less than its accounts indicate. Credit Suisse trades at about half of tangible book.

To start reversing that slide, the CEOs will have to show their strategies to cut costs and improve profitability are bearing fruit, the respondents said, even as Britain’s decision to quit the European Union threatens to worsen an already tough environment for banks. 

Their challenges were daunting from the start, and neither CEO promised a speedy turnaround. Both replaced long-serving executives who failed to decisively overhaul their securities units even as rising capital requirements and record-low interest rates ate into profitability. Both also took immediate steps to bolster capital buffers -- Cryan by suspending the dividend and Thiam by selling stock.

John Cryan
John Cryan
Photographer: Krisztian Bocsi/Bloomberg

“Credit Suisse now has more CET 1 capital than ever before in its recent history,” the Zurich-based lender said in an e-mailed comment. “We have rapidly and massively reduced the level of risk in our investment bank and have taken decisive measures to lower costs. We are aware that our share price is dependent on the successful execution of our strategy over the long term and we are working consistently to achieve this.”

Deutsche Bank declined to comment on the survey. At a conference in New York in late May, Cryan told investors that Deutsche Bank is “correcting some mistakes that have been made over the past 20 years or so,” and that if the company fails to make a profit this year, that could actually be a hallmark of success in working through its restructuring and legal matters.

Chairmen Backing

The two CEOs have been publicly endorsed by the chairmen who hired them. Credit Suisse’s Urs Rohner told Handelszeitung that Thiam is “the right man for the job” earlier this week. Deutsche Bank’s Paul Achleitner has made similar comments about Cryan, who received the backing of 98.5 percent of votes cast at Deutsche Bank’s annual shareholder meeting in May.

Tidjane Thiam
Tidjane Thiam
Photographer: Michele Limina/Bloomberg

Cryan, who inherited Europe’s largest investment bank, laid out plans in October to cut jobs, risky assets and clients at the securities unit. His candor in describing Deutsche Bank’s challenges found favor with some respondents, even if the firm’s business model was viewed as problematic.

Deutsche Bank staff say the company has made progress in the last year in communicating transparently, providing greater accountability and simplifying processes and systems, according to results of a survey the company published on Friday. Still, fewer employees feel committed to the lender than they were a year earlier, with less than half saying they are proud to work at the firm, according to the findings.

Thiam, 53, won plaudits early on for pledging to focus on Credit Suisse’s wealth management business while shrinking the investment bank. Yet the risks at the securities business surfaced when it lost about $1 billion on illiquid debt holdings. Thiam drew criticism for his communication on the day the losses were announced.

Understanding Clients

“I’m totally unhappy with these guys,” said Martin Wilhelm, founder of IfK GmbH, which manages 600 million euros of fixed-income securities, including bank bonds in Kiel, Germany. “I get the impression that they’re too focused internally, just running their businesses from the top, and that they don’t understand their clients.”

((The survey was conducted during the month of June, with most responses received before Britain’s referendum on EU membership. Bloomberg contacted analysts with a cross-section of ratings on the firms, and both equity and debt investors. They were asked to rate the CEOs’ performances on the following key topics: Strategic thinking; execution; communication; ability to change his institution’s culture; and the chances he will succeed in turning around the investment bank.))

Before it's here, it's on the Bloomberg Terminal. LEARN MORE