You Cryan, Boy?!

“Reuters – Large investors in Deutsche Bank have urged its chairman to provide a clear signal on whether the board backs the lender’s embattled chief executive or not…

Dead man walking. John Cryan is inevitably out as CEO of Deutsche Bank, and the announcement will come sooner rather than later. He was appointed CEO in 2015 after their board gave Anshu Jain his walking papers. So now, after a few years of unlimited brats and kraut, it looks like this native Briton is back to bangers and mash.

You hate to see someone get embarrassed on the public stage like this, but you also hate to hire someone who sucks at their job. Cryan was unable to maximize shareholder value, which is like, prerequisite #1 for being CEO of a bank. It is worth noting however, that he didn’t inherit a perfectly healthy institution, either – but he knew what the job entailed and came out of the gates with an ambitious restructuring plan called “Strategy 2020”. The whole thing was predicated upon firing a few thousand employees, raising come capital and reducing costs. Pretty standard stuff.

His real problems started in Q3 2016, when the U.S. government levied a $14B (eventually settled for $7.2B) penalty on the bank related to the marketing of crisis-era RMBS. In response to the financial crisis, European banks were required to raise capital to buffer themselves against a future crisis, and they used Contingent Convertibles (CoCos) to do it. These securities are designed to be wiped out first in the event of a credit crisis, forcing creditors to bail-in the banks vs. having central banks bail them out. Once news of the U.S. fine hit, DB CoCos got pummeled because markets knew they couldn’t pay up based on their cap structure at the time. Long story short, this whole mess wiped billions in market cap off the Company and forced it to raise $8B in equity a few months later – at a 35% discount (sheesh)!

Fast forward to today and the Company hasn’t turned a profit in THREE YEARS. Imagine that, a bank not being able to turn a profit in 2017. You gotta fire this guy, and I’m surprised it took so long. The ironic part is that he knew DB had to raise that $8B to save the bank, and the same guys he sold the equity to are making calls directly to the board to fire his ass. Tough look, John. Tough look, indeed. So let’s raise a glass to John Cryan, because at the end of the day, he no longer needs to live in Frankfurt – and that my friends, is a victory in and of itself.