Deutsche Bank’s Surprise CEO Pick Brings Turnaround RecordZeke Faux, Michael J. Moore and Noah Buhayar
Deutsche Bank AG is turning to a British takeover specialist who helped reshape two of the world’s biggest banks as it seeks to end years of missed targets and underperformance.
John Cryan, a supervisory board member since 2013 who hasn’t run any of the firm’s operations, was named the next chief executive officer of Europe’s largest bank by assets in a surprise announcement Sunday. He’ll replace Deutsche Bank co-CEO Anshu Jain at the end of the month and become sole CEO when Juergen Fitschen steps down next May. The shares surged as much as 8.2 percent, the most in two years.
Cryan, 54, climbed the ranks at UBS AG to become one of its most senior investment bankers, helping advise Dutch lender ABN Amro Holding NV on its record-setting sale in 2007. As the financial crisis mounted the next year, UBS promoted Cryan to chief financial officer, where he helped slash the Swiss bank’s balance sheet amid a government rescue. He’s known for deliberate and precise answers, and even speaks German.
“John’s not naturally a cheerleader, he’s cerebral,” said Olivier Sarkozy, who at UBS served alongside Cryan as co-head of the investment banking group serving financial institutions. “The board knows him well, and they’re saying we want that type of thoughtfulness, intellectual rigor.”
Still, the panel’s decision to pick Cryan as CEO was a surprise, according to one top investor, who said he thought Chairman Paul Achleitner would have stepped into the role.
Cryan will inherit Jain and Fitschen’s two-month-old plan for overhauling the bank. The initiative has been a tough sell to investors looking for more radical measures to restore profitability eroded by stiffer regulation, a Wall Street trading slump and years of government probes. The plan calls for the lender to shrink the investment bank and sell part of the consumer operation, Postbank, which the company spent more than 6 billion euros ($6.7 billion) to acquire.
During a shareholder vote at last month’s annual meeting, Deutsche Bank’s managers drew the lowest approval in at least a decade as attendees questioned their ability to deliver targets under the new plan. While Deutsche Bank said Sunday that Cryan will look to “advance” Strategy 2020, the investor who spoke on condition of anonymity said he’s waiting to see whether Cryan modifies it.
When ABN Amro enlisted Cryan as one of its lead advisers, the banking industry was nearing the end of a boom. The bank sold its U.S. operations to Bank of America Corp. for $21 billion, then the rest of itself for about 72 billion euros to a group led by Royal Bank of Scotland Group Plc. The transaction was a record for the industry. Soon after, RBS had to be bailed out by the U.K. government. Prime Minister Gordon Brown called the deal “irresponsible” by RBS.
“John got us hired to sell ABN Amro, and he dealt with all the controversy that surrounded that transaction,” Sarkozy said. “He did a masterful job.”
Cryan was appointed CFO of UBS in September 2008 as crisis-era losses and writedowns at the Zurich-based bank snowballed past $48 billion, more than any other European lender. In interviews and calls with analysts, he avoided broad pronouncements and often reminded investors that avoiding the risks that almost felled the bank would mean reduced profitability in the short term.
“What we don’t want to do is load up our balance sheet with positions where we are relying on the market heading in a particular direction to make money,” he said in a July 2010 interview.
While Cryan was UBS’s CFO, the bank cut assets to about 1.2 trillion Swiss francs ($1.3 trillion) from 2 trillion francs, according to data compiled by Bloomberg. The bank eliminated thousands of jobs and reorganized divisions to focus on wealth management. It also lost $2.3 billion on unauthorized bets by a 31-year-old trader who hid his positions from management.
Cryan didn’t respond to a message seeking comment for this story. His wife, Mary, worked at UBS while he was there, according to a person with knowledge of the matter. She purchased a home in Annapolis, Maryland, in 2009, property records show. They have a home in London as well, and no children, the person said.
A graduate of Cambridge, Cryan joined S.G. Warburg & Co. in 1987 before its acquisition by UBS in 1995.
Cryan left UBS in 2011 to “pursue other interests,” and later joined Temasek Holdings Pte, the Singapore state-owned investment company. He stepped down as its president for Europe in 2014. At Deutsche Bank he has served on the supervisory board’s audit and risk committees. He’s also a member of the board at Man Group Plc, the British hedge-fund giant.
Cryan has years of work cut out for him. Under Jain and Fitschen, Deutsche Bank’s stock has performed the worst among global peers. The shares fell the most in 15 months when the new strategy was unveiled in April and now trade for about 60 percent of tangible book value -- the price investors should expect to receive if the company liquidated its assets.
Over the past month, Jain concluded the bank needed a five-year commitment from its co-CEOs to carry out the strategic overhaul and decided a leadership change would be better for the firm, said a person with knowledge of the situation. Fitschen didn’t want to continue leading the firm and agreed to resign with Jain, said the person, asking not to be identified because the talks were private.
Davide Serra, the founder of London-based Algebris Investments LLP and a former Morgan Stanley executive, said he expects Cryan “to raise capital and shrink more aggressively the loss-making empire Anshu has built.”
Read this next:
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In the statement announcing his appointment, Cryan didn’t give any clues about a potential change of direction. “Our future will be defined by how well we deliver on strategy, impress clients and reduce complexity,” he said.
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