FRANKFURT (Reuters) - Germany's largest lender Deutsche Bank (DBKGn.DE) purged its leadership on Sunday, appointing Briton John Cryan as chief executive to replace Anshu Jain just two weeks after Jain was given more power to reorganise the bank.
Deutsche Bank has struggled to restore an image tarnished by a raft of regulatory and legal problems which include probes into alleged manipulation of benchmark interest rates, mis-selling of derivatives, tax evasion and money laundering.
The German lender presented a radical management shake-up on May 21 in a last ditch attempt to restore confidence in its management, but some investors demanded more changes.
Cryan, 54, has been on the bank's supervisory board since 2013 and was a former chief financial officer of rival bank UBS UBSG.VX. He will replace co-CEO Jain, who will resign on June 30, and become the sole CEO when the other co-CEO, Juergen Fitschen, steps down next year, the bank said.
Cryan said there was work to be done. "Our future will be defined by how well we deliver on strategy, impress clients and reduce complexity," he said in a Deutsche statement announcing his appointment.
The new CEO, who starts on July 1, was heavily involved in the bank's new strategy blueprint and is unlikely to make significant changes to it, a senior bank source told Reuters.
"The strategy will not be reformulated but there's obviously room to shape the details of the strategy," the source said.
The strategic plan has been roundly criticized by investors as too little too late.
"A lot of detail is still needed on it," said Chris Wheeler, bank analyst at Atlantic Equities in London. "Does the new person say they want to review it or say it's fine ... It's a massive job still to do. It's one of the world's biggest investment banks and Germany's national champion."
Analysts at investment bank Jeffries praised Cryan's track record at UBS for "underpromising to over-deliver," saying he would be more likely to reverse Deutsche's ill fortunes without raising new capital or changing strategy yet again.
"Deutsche is transitioning from one of the least credible management teams in investors' minds to one of the most highly regarded," Jefferies wrote in a note to clients. "Market confidence on delivery should clearly increase."
Supervisory board chairman Paul Achleitner said the decision by Jain and Fitschen to step down demonstrated their commitment to putting the bank's interests ahead of their own, praising their contributions
Jain decided that whoever was going to see through the strategy at Deutsche Bank needed to commit to a full five years and he was not able to do this, a source familiar with the situation told Reuters. He first discussed this with co-CEO Fitschen and the pair then agreed that they would both offer their resignation to Achleitner. Achleitner then let the supervisory board know of their decision, the source added.
Jain, an Indian-born British citizen, landed the top spot at Deutsche in 2012 after the investment banking division he ran consistently delivered up to 85 percent of group profit and frequently outperformed peers.
But tougher regulatory requirements and litigation, including a $2.5 billion fine to settle allegations that Deutsche traders rigged benchmark interest rates, took the shine off a division often referred to internally as "Anshu's army".
Making Jain directly responsible for cutting Deutsche Bank's costs by 4.7 billion euros ($5.2 billion), selling its Postbank DPBGn.DE retail business and paring back its investment bank put huge pressure on the executive.
After criticism from shareholders at last month's AGM, Jain addressed a gathering of senior staff and coordinators, offering an early hint that he was prepared to leave. “I don’t want to stand in the way of the development of the bank and if necessary I will step side," Jain told them, according to one person present at the gathering.
“He was really upset, I mean, really upset.”
Fitschen was hired as co-CEO to maintain the bank's German profile but his ability to sell the group's strategy to domestic shareholders has been impaired by his own legal problems.
He is required to appear nearly every week at a criminal court in Munich to defend himself against allegations that he misled investigators in a dispute with the heirs of the Kirch media empire.
Deutsche Bank has been one of the weakest performers of any major bank since Jain and Fitschen took over as co-chief executives in June, 2012. (link.reuters.com/dyf63w)
Huw van Steenis, analyst at Morgan Stanley in London, said legacy issues, leverage and German retail would drag on the bank. "With unions seeking a 5 percent wage increase and job security, it's not obvious DB has easy levers to pull fast," he said.
"Costs on the other hand have been stubbornly high, despite DB (having) multiple plans to cut costs which have failed to deliver."
The shake-up is the latest of a string of similar moves among European banks. Barclays (BARC.L), Credit Suisse CSGN.VX and UBS UBSN.VX have all gained new leaders since the financial crisis hit.
Gerhard Schick, the spokesman for financial matters for Germany's Green party said it finally gave Deutsche Bank a chance for a fresh start.
"The current bosses were tied too closely to the problems for them to represent a change of corporate culture. This new start should have been done when (former CEO) Josef Ackermann left," he said.
"The decisions back then have led to a couple of lost years for the bank. The new management needs to clean up, particularly in investment banking."
Additional reporting by Arno Schuetze, Andreas Kroener, Alexander Huebner and Jonathan Gould in Frankfurt, Michael Nienhaber in Berlin and Steve Slater in London