In surprise news on Sunday, Deutsche Bank co-CEOs Anshu Jain and Jürgen Fitschen announced their resignations. They will be replaced by former UBS CFO John Cryan. Jain’s resignation is effective at the end of June, but Fitschen will be staying on through May of next year to assist in the transition.

Details on Deutsche Bank resignations

The dual CEO resignations at Deutsche Bank come after a series of missteps and regulatory penalties at the mega bank. Moreover, according to the Wall Street Journal, an increasing number of shareholders and employees have been losing confidence in the bank’s performance and the management team.

The sources noted Jain’s decision to resign gelled over the last few weeks. Jain decided this was the right time to move on as the bank was reviewing its five-year strategic and financial goals.

Jain’s resignation was at least partly related to criticism from German labor unions and media regarding the bank’s restructuring and move to cut thousands of jobs as well as shut down dozens of bank branches, according to one source. Apparently, Jain also thought his lack of fluent German was a barrier to engaging shareholders at the bank’s annual meeting. Moreover, he was increasingly seeing himself as a lightning rod to critics, and worse, a distraction that was interfering with the bank’s operations.

DB’s board convened on Sunday to finalize the decision and officially name Cryan as CEO.

Jain and Fitschen’s “decision to step down early demonstrates impressively their attitude of putting the bank’s interests ahead of their own,” Deutsche Bank Chairman Paul Achleitner noted in a statement on Sunday.

Deutsche Bank
Deutsche Bank

More on new Deutsche Bank CEO John Cryan

John Cryan worked at UBS as CFO until 2011. Cryan, 54, was employed at Singapore state investment firm Temasek Holdings afterwards, and joined DB’s board. Cryan was highly regarded for the successful, complex restructuring at UBS during his employment. By the same token, he has received much praise for “underpromising to overdeliver”, which some investors have noted is the exact opposite of the current management.

Analysts differ on the events, but most note the key here is the 2020 plan and ask whether the new CEO will continue with it or if the management change marks a change of plan.

Deutsche Bank changes: Analysts react

Of note, in their latest research report, Jefferies rates Deutsche Bank a Buy with a price target of €37.00, the report is titled “if he [Cryan] can’t do it no one can”.

Analysts at SocGen state:

While investors might point to a multitude of problems (un-ambitious restructuring plans, numerous litigation issues, a lacklustre FICC market), we think the crux of the matter is weak equity capitala dequacy. Various attempts to remediate the problem – via equity raises and deleveraging – have negatively impacted an already low ROTNAV. Our view is not that the previous management did not want to restructure DBK for higher returns, but that the reality was that they couldn’t. In such a situation, the best that one should expect from cost-cutting is to maintain ROTNAV at the pre-restructuring level, in our view.

Morgan Stanley states:

New CEO likely to focus on Execution as much as a Strategy. DB has only grown book value 1% pa since 2007 (vs 10% at GS) – & DB has disappointed on costs, non-core & capital reallocation. At 0.7x there’s value potential to be unlocked, but long dated.

JPMorgan opines:

We see the change as unexpected especially after the management board changes announced on May 20th which we saw as strengthening the position of Anshu Jain by giving him the responsibility on the Management Board for Strategy & Organizational Development – i.e. full control of the delivery on Strategy 2020.

We think the change is triggered by Anshu Jain being strategic focused, giving way for John Cryan who is known as bottom-up execution oriented, now that the main strategy is set. At this point, in our view DB share price performance will be driven by bottom-up focus on delivering on shrinkage of businesses, asset reduction and most importantly the €3.5bn gross cost savings DB is targeting under Strategy 2020.

We expect John Cryan to focus in particular on delivery on cost savings with the previous DB CEOs having missed targets – investors need to see evidence on cost management – John Cryan has a proven track record in turning UBS around as its CFO and is highly regarded by the market in our view.