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Co-Chief Executives of Deutsche Bank Resign Deutsche Bank Co-Chief Executives Resign
(about 5 hours later)
FRANKFURT — Even as other European banks reduced their presence on Wall Street in the face of new regulations and legal challenges, Deutsche Bank has been the exception.FRANKFURT — Even as other European banks reduced their presence on Wall Street in the face of new regulations and legal challenges, Deutsche Bank has been the exception.
But with the announced resignations on Sunday of its co-chief executives, one of them Anshu Jain, an architect of Deutsche Bank’s two-decade expansion into the big leagues of investment banking, the bank is likely to re-examine its status as the last European bank left standing on Wall Street. But with the announced resignations on Sunday of its co-chief executives, one of them Anshu Jain, an architect of Deutsche Bank’s two-decade expansion into the big leagues of investment banking, the bank is likely to re-examine its status as the last European bank left standing on Wall Street. 
Mr. Jain, 52, said he would resign at the end of the month after three years as co-chief executive. Jürgen Fitschen, 66, the other co-chief executive, will remain another year but will step down before his contract would have run out in 2017, Deutsche Bank said on Sunday.Mr. Jain, 52, said he would resign at the end of the month after three years as co-chief executive. Jürgen Fitschen, 66, the other co-chief executive, will remain another year but will step down before his contract would have run out in 2017, Deutsche Bank said on Sunday.
Mr. Jain will be replaced by John Cryan, 54, a former high-ranking executive of the Swiss bank UBS. Mr. Cryan will become the first leader of Deutsche Bank since the 1990s whose career has not revolved around turning it into a worthy competitor to Goldman Sachs, JPMorgan Chase and the other American investment banking giants.Mr. Jain will be replaced by John Cryan, 54, a former high-ranking executive of the Swiss bank UBS. Mr. Cryan will become the first leader of Deutsche Bank since the 1990s whose career has not revolved around turning it into a worthy competitor to Goldman Sachs, JPMorgan Chase and the other American investment banking giants.
Mr. Cryan has spent much of his career in investment banking, but not at Deutsche Bank. He is a member of Deutsche Bank’s supervisory board, a part-time position that he will give up, but has never been an executive at the bank.Mr. Cryan has spent much of his career in investment banking, but not at Deutsche Bank. He is a member of Deutsche Bank’s supervisory board, a part-time position that he will give up, but has never been an executive at the bank.
Mr. Cryan’s lack of a personal history with the investment banking unit may fuel speculation that Deutsche Bank will scale back its investment banking activities, following other European institutions like UBS, Credit Suisse and Barclays.Mr. Cryan’s lack of a personal history with the investment banking unit may fuel speculation that Deutsche Bank will scale back its investment banking activities, following other European institutions like UBS, Credit Suisse and Barclays.
While Deutsche Bank, Germany’s largest bank, has the biggest investment bank not based in the United States, some analysts say it can no longer compete at the same level in an age when regulators are cracking down on banks’ use of borrowed money to do business. The world’s five largest investment banks by revenue are based in the United States; Deutsche Bank is No. 6.While Deutsche Bank, Germany’s largest bank, has the biggest investment bank not based in the United States, some analysts say it can no longer compete at the same level in an age when regulators are cracking down on banks’ use of borrowed money to do business. The world’s five largest investment banks by revenue are based in the United States; Deutsche Bank is No. 6.
“Simply put, Deutsche is not the Goldman Sachs of Europe,” Huw van Steenis, head of European banks equity research at Morgan Stanley, said in an email on Sunday. Mr. van Steenis estimated that Deutsche Bank needed to take on twice as much leverage, or borrowed money, as Goldman to earn the same profit.“Simply put, Deutsche is not the Goldman Sachs of Europe,” Huw van Steenis, head of European banks equity research at Morgan Stanley, said in an email on Sunday. Mr. van Steenis estimated that Deutsche Bank needed to take on twice as much leverage, or borrowed money, as Goldman to earn the same profit.
Deutsche Bank has already announced a reorganization plan intended to simplify the bank and annually save 3.5 billion euros, or about $3.9 billion. Its goal is to produce a profit equal to at least 10 percent of the capital invested.Deutsche Bank has already announced a reorganization plan intended to simplify the bank and annually save 3.5 billion euros, or about $3.9 billion. Its goal is to produce a profit equal to at least 10 percent of the capital invested.
As part of the plan, Deutsche Bank will spin off Postbank, a branch network in Germany. The bank also plans to reduce leverage, but Mr. Jain had been adamant that Deutsche Bank would remain a force in investment banking.As part of the plan, Deutsche Bank will spin off Postbank, a branch network in Germany. The bank also plans to reduce leverage, but Mr. Jain had been adamant that Deutsche Bank would remain a force in investment banking.
A decision by Mr. Cryan to cut the size of the investment bank could please regulators who have been critical of Deutsche Bank’s heavy dependence on borrowed money. But that move would also raise concerns in the rest of the world that with no serious rivals outside the United States, American investment banks would become even more dominant.A decision by Mr. Cryan to cut the size of the investment bank could please regulators who have been critical of Deutsche Bank’s heavy dependence on borrowed money. But that move would also raise concerns in the rest of the world that with no serious rivals outside the United States, American investment banks would become even more dominant.
In a statement on Sunday, Mr. Cryan said one of his goals would be to “reduce complexity.” Otherwise he offered no hints about which path he would take.In a statement on Sunday, Mr. Cryan said one of his goals would be to “reduce complexity.” Otherwise he offered no hints about which path he would take.
As an outsider, Mr. Cryan will be untainted by the legal problems and accusations of misconduct that have weighed on Deutsche Bank’s profit and undercut its reputation.As an outsider, Mr. Cryan will be untainted by the legal problems and accusations of misconduct that have weighed on Deutsche Bank’s profit and undercut its reputation.
His appointment has similarities to recent management turnover at Credit Suisse, another bank that has paid multibillion-dollar fines for past misconduct. In March, Credit Suisse appointed Tidjane Thiam, who came from the insurance business, to replace Brady W. Dougan, a veteran of the bank’s investment banking arm.His appointment has similarities to recent management turnover at Credit Suisse, another bank that has paid multibillion-dollar fines for past misconduct. In March, Credit Suisse appointed Tidjane Thiam, who came from the insurance business, to replace Brady W. Dougan, a veteran of the bank’s investment banking arm.
Since becoming co-chief executive in 2012, Mr. Jain had faced questions about whether someone so closely identified with the investment banking unit was the right person to deal with serious accusations of wrongdoing. Most of the allegations of misconduct at Deutsche Bank stemmed from activities at the investment banking unit, which Mr. Jain oversaw before becoming co-chief executive.Since becoming co-chief executive in 2012, Mr. Jain had faced questions about whether someone so closely identified with the investment banking unit was the right person to deal with serious accusations of wrongdoing. Most of the allegations of misconduct at Deutsche Bank stemmed from activities at the investment banking unit, which Mr. Jain oversaw before becoming co-chief executive.
Mr. Jain, who was born in India and earned an M.B.A. at the University of Massachusetts, has worked at Deutsche Bank for 20 years and played a major role in establishing the bank as a force on Wall Street. His predecessor and former boss, Josef Ackermann, was also an investment banker by training.Mr. Jain, who was born in India and earned an M.B.A. at the University of Massachusetts, has worked at Deutsche Bank for 20 years and played a major role in establishing the bank as a force on Wall Street. His predecessor and former boss, Josef Ackermann, was also an investment banker by training.
But investment banking proved a liability after the financial crisis, when Deutsche Bank became embroiled in a series of official investigations of wrongdoing. In April, Deutsche Bank agreed to pay $2.5 billion to the United States and British authorities to settle accusations that some employees conspired to rig benchmark interest rates.But investment banking proved a liability after the financial crisis, when Deutsche Bank became embroiled in a series of official investigations of wrongdoing. In April, Deutsche Bank agreed to pay $2.5 billion to the United States and British authorities to settle accusations that some employees conspired to rig benchmark interest rates.
While Mr. Jain was not accused of taking part in the conspiracy, some shareholders said he handled the investigation and settlement badly and called for him to step down. The fine was more than other banks paid in the same case, reflecting what the authorities said was foot-dragging by Deutsche Bank in providing information to investigators.While Mr. Jain was not accused of taking part in the conspiracy, some shareholders said he handled the investigation and settlement badly and called for him to step down. The fine was more than other banks paid in the same case, reflecting what the authorities said was foot-dragging by Deutsche Bank in providing information to investigators.
Partly because of the $2.5 billion settlement, Deutsche Bank’s profit in the first three months of the year sank by about half, to €559 million from €1.1 billion a year earlier. Legal costs more than offset a 24 percent increase in quarterly revenue, to €10.4 billion.Partly because of the $2.5 billion settlement, Deutsche Bank’s profit in the first three months of the year sank by about half, to €559 million from €1.1 billion a year earlier. Legal costs more than offset a 24 percent increase in quarterly revenue, to €10.4 billion.
The bank has also faced criticism from United States regulators. In late 2013, the Federal Reserve Bank of New York sent a letter to Deutsche Bank, directing it to fix longstanding deficiencies in its financial reporting.The bank has also faced criticism from United States regulators. In late 2013, the Federal Reserve Bank of New York sent a letter to Deutsche Bank, directing it to fix longstanding deficiencies in its financial reporting.
“Deutsche Bank has critical operational issues and management issues,” said Janet Tavakoli, president of the Chicago consulting firm Tavakoli Structured Finance and a frequent critic of the bank. “One cannot effectively manage risk — or measure the current situation — when internal paperwork and records are not in order.”“Deutsche Bank has critical operational issues and management issues,” said Janet Tavakoli, president of the Chicago consulting firm Tavakoli Structured Finance and a frequent critic of the bank. “One cannot effectively manage risk — or measure the current situation — when internal paperwork and records are not in order.”
Mr. Jain appeared to have recognized that his legacy had become a liability to the bank.Mr. Jain appeared to have recognized that his legacy had become a liability to the bank.
While he was under pressure from shareholders, the decision to leave was his own, according to a person with knowledge of the situation who spoke on the condition of anonymity. Mr. Jain will not collect a €15 million severance payment he would have received had he been fired, the person said.While he was under pressure from shareholders, the decision to leave was his own, according to a person with knowledge of the situation who spoke on the condition of anonymity. Mr. Jain will not collect a €15 million severance payment he would have received had he been fired, the person said.
In a statement, Mr. Jain said: “I will be forever honored to have served here, and I am convinced that the future of the bank is bright and in very good hands.”In a statement, Mr. Jain said: “I will be forever honored to have served here, and I am convinced that the future of the bank is bright and in very good hands.”
Paul Achleitner, chairman of the Deutsche Bank supervisory board, said in a statement that the decision by Mr. Jain and Mr. Fitschen to step down “demonstrates impressively their attitude of putting the bank’s interests ahead of their own.”Paul Achleitner, chairman of the Deutsche Bank supervisory board, said in a statement that the decision by Mr. Jain and Mr. Fitschen to step down “demonstrates impressively their attitude of putting the bank’s interests ahead of their own.”
“Anshu has earned a place in our bank’s history as an executive who helped to transform Deutsche Bank into the global leader, rooted in Germany, that it is today,” Mr. Achleitner said.“Anshu has earned a place in our bank’s history as an executive who helped to transform Deutsche Bank into the global leader, rooted in Germany, that it is today,” Mr. Achleitner said.
Pressure from regulators to reduce the use of borrowed money in an effort to avoid another financial crisis has made many investment banking activities less profitable.Pressure from regulators to reduce the use of borrowed money in an effort to avoid another financial crisis has made many investment banking activities less profitable.
It is not a foregone conclusion that Mr. Cryan will oversee a retreat from investment banking, the area where he has spent most of his career. A graduate of Cambridge, Mr. Cryan, who is British, worked at Warburg starting in 1987 and remained after it was acquired by UBS in 1995.It is not a foregone conclusion that Mr. Cryan will oversee a retreat from investment banking, the area where he has spent most of his career. A graduate of Cambridge, Mr. Cryan, who is British, worked at Warburg starting in 1987 and remained after it was acquired by UBS in 1995.
Still, the three years from 2008 to 2011 when he was chief financial officer at UBS was a period when the bank was cutting back on risk and investment banking. From 2012 to 2014, he was president for Europe at Temasek, the sovereign wealth fund of Singapore.Still, the three years from 2008 to 2011 when he was chief financial officer at UBS was a period when the bank was cutting back on risk and investment banking. From 2012 to 2014, he was president for Europe at Temasek, the sovereign wealth fund of Singapore.
At Deutsche Bank, Mr. Cryan will be co-chief executive with Mr. Fitschen until Mr. Fitschen’s departure next year, then he will become sole chief executive, the bank said.At Deutsche Bank, Mr. Cryan will be co-chief executive with Mr. Fitschen until Mr. Fitschen’s departure next year, then he will become sole chief executive, the bank said.