Historic shake-up of senior staff at Deutsche Bank

Deutsche Bank's share price rose after the management changes were announced. European banks are struggling to adapt to higher capital requirements, low interest rates and diminished opportunities for growth
Deutsche Bank's share price rose after the management changes were announced. European banks are struggling to adapt to higher capital requirements, low interest rates and diminished opportunities for growthPHOTO: BLOOMBERG

Overhaul takes place after bank's tangle with US, UK regulators led to $3.4b settlement

FRANKFURT • Mr John Cryan, co-chief executive officer at Deutsche Bank, is undertaking the investment bank's biggest management shake-up in more than a decade and splitting it up as he prepares to scale back the trading empire built by his predecessor.

The management changes may ease Mr Cryan's efforts to reshape the bank and rebuild relations with regulators after a record US$2.5 billion (S$3.4 billion) settlement with United States and British authorities for manipulating interest-rate benchmarks.

Mr Cryan, 54, replaced Mr Anshu Jain in July after surging litigation costs and tougher regulatory demands squeezed profitability and eroded investors' trust.

"John is trying to create a bank in his image and the people who are leaving are people who were building it in Mr Anshu's image," said Mr Christopher Wheeler, a banking analyst at Atlantic Equities in London. Under the shake-up, Mr Colin Fan, 42, the co-head of the investment banking and trading unit, was to have resigned, effective yesterday, while Mr Michele Faissola, 47, a former senior banker at the fixed-income business who now leads asset and wealth management, will leave after a transition period, Deutsche Bank said on Sunday.

Deutsche Bank shares rose as much as 3 per cent after the announcement.

Seven years after the financial crisis, Europe's global banks are struggling to adapt to higher capital requirements, rock-bottom interest rates and diminished opportunities for growth. 

Credit Suisse Group AG's new chief executive, Mr Tidjane Thiam, will reveal tomorrow his plans to prune the investment bank while expanding in Asia and wealth management. Barclays, BNP Paribas and Standard Chartered are also scaling back operations.

"All of these banks are looking at their models going, 'You know what, we were too optimistic on revenues, they're not coming back,'" said Mr Conor Muldoon, who helps manage about US$40 billion, including shares of Credit Suisse, Barclays and UBS Group, at Causeway Capital Management. 

In addition, as rising capital requirements drive down return on equity, a key measure of profitability, the only lever they have is to change the scope of the bank and remove costs, he said.

As part of the reorganisation, Deutsche Bank will abolish its 19-member group executive committee as well as 10 of its 16 management board committees.

"We want to create a better-controlled, lower-cost and more focused bank that delivers long-term value to shareholders," Mr Cryan said in a statement. He will present his strategy to reduce expenses and boost profitability on Oct 29.

"Deutsche Bank rarely underwent such a fundamental reorganisation in its history," chairman Paul Achleitner said in the statement. "This also requires tough decisions."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on October 20, 2015, with the headline 'Historic shake-up of senior staff at Deutsche Bank'. Print Edition | Subscribe