Discontent at investment banks rising

LONDON • Investors, regulators and employees hailed Mr John Cryan and Mr Tidjane Thiam as leaders who could turn around Europe's two biggest investment banks. Less than a year into their jobs, the joy is gone.

The chief executive officers (CEOs) of Deutsche Bank and Credit Suisse Group are squeezed between investors pushing them to boost profitability and employees demoralised by job cuts, lower pay and their bosses' blunt criticism. Shares for both banks are down more than 30 per cent this year, touching their lowest prices in decades.

The two men took over with mandates to tackle costly debt-trading businesses, outdated technology and weak controls that helped cause the mounting legal bills eating into their capital. Since then, a market slowdown has led some investors to question whether the plans go far enough, while others warn that cutting expenses too deeply will plunge the firms further into crisis by squelching the motivation of key earners.

"In the revenue environment we've got today, the need to go further on costs is almost inevitable," said Mr Barrington Pitt Miller, an analyst with Janus Capital Group. "But we're not very far into these plans, and we need to see the banks do what they said they would."

Morale at Deutsche Bank was already on the decline when Mr Cryan, 55, replaced co-CEO Anshu Jain, 53, last July. An internal survey found employee commitment had fallen in June from a year earlier. Both he and Mr Thiam, 53, who joined Credit Suisse last June, have alienated investment bankers and traders with job cuts, lower bonuses and criticism of excessive pay, according to current and former executives at the two companies who asked not to be identified discussing internal matters.

Deutsche Bank faces a potential brain drain, while raising salaries for some employees is also discouraging some senior staff, the person said. Mr Michael Golden, a spokesman for Deutsche Bank, said the company is not having any trouble retaining or attracting employees.

At Credit Suisse, some top bankers and traders have already left, and others are grumbling that Mr Thiam, a former CEO of British insurer Prudential, does not understand their businesses or care enough about them. Even those traders whose jobs are not at risk say the mood in the global markets division is depressed.

Frustration turned to anger this year when Mr Thiam revealed Credit Suisse had lost almost US$1 billion (S$1.36 billion) on credit wagers. The CEO said traders had amassed some of the bets unbeknownst to him and his team. That was hard to believe, according to former employees. Mr Christoph Meier, a spokesman for Credit Suisse, said the Zurich-based bank was focused on being a top wealth manager, right-sizing its investment- banking business and becoming more profitable. "The benefits of these changes will flow to our shareholders in the coming years," he wrote in an e-mail.

"The environment does seem to be starting to get people down," said Mr Ben Kumar of Seven Investment Management, Deutsche Bank's 30th biggest shareholder. Still, Mr Kumar said, both Mr Cryan and Mr Thiam have shown they're effective at running businesses.

Spokesmen for both banks said their CEOs would not comment for this report.

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A version of this article appeared in the print edition of The Straits Times on April 19, 2016, with the headline 'Discontent at investment banks rising'. Print Edition | Subscribe