On his first day as co-chief executive of Deutsche Bank, John Cryan sent a letter to employees outlining what he said was the tough challenges the company was facing, in expectations of the turbulent times the company would face. Nine months later , he employees are facing plenty of downs and not much ups. In January, the bank said it list $7.6 billion last year, its first annual lost since 2008. A selloff in February compelled the bank to reassure hedge funds it wasn’t going to miss payments on some of its debts. Its shares are down 34 % this year, compared with 21% for the Stoxx Europe 600 Banks Index.
At an investors conference in March, Mr Cryan did not dispel investors’ gloom, choosing instead to highlight the harsh truth of the lack of profitability of the bank in recent months. This trend has been part of the larger decline in the European investment banking industry which has been adversely affected by a recession, declining commodity prices, rock bottom interest rates, stiffer regulations and doubts about a bank’s ability to earn profits.
Also, Mr Cryan’s dour demeanor was also a cause for concern for some investors and employees. His style of bad news first did not sit well with certain stakeholders of the firm, causing management challenges and also slow progress of the revamp. This has largely contributed to the slow track back to profitability for Deutsche as the pace of regulatory change has outpaced the bank’s ability to adapt.
By: Leonard Ho
The Wall Street Journal