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The resignation announcement from Anshu Jain and Jürgen Fitschen, co-CEOs of the Deutsche Bank, seemed sudden and surprising to many, but the international media explain why the co-CEOs decided to quit.
1. Falling behind rivals
According to reports in The Financial Times (FT), the Frankfurt based German giant’s share price has stagnated since Jain-Fitschen took charge. By Friday, it had fallen 0.6 per cent versus June 1 2012. Over the same period however, FT reported, the shares of Deutsche’s peers have soared: Morgan Stanley’s have almost trebled, Goldman Sachs’ more than doubled, UBS’s is up more than 80 per cent and Barclays’ more than 60 per cent.
2. Struggling to maintain profit flow
Even though Deutsche emerged strong from the 2008-09 global recession, earning relatively healthier profits than its peers between 2009 and 2011, the bank has found the going harder since 2012, says the FT.
The Jain-Fitschen duo had to deal with a slew of legal problems, but they also failed to keep under control the cost to income ratio, which climbed up to 87 per cent in 2014, much higher than the targeted 65 per cent.
3. Low returns on equity
The tenure of Jain and Fitschen also saw Deutsche post a post-tax return on equity of 0.5 per cent in 2012, 2 per cent in 2013 and 2.7 per cent in 2014 — all of them behind its global peers.
FT points out that while he low returns were partly a result of the fines Deutsche faced, and also because of two big capital raisings in 2013 and 2014, analysts think Deutsche was too slow to react to changes in the regulatory and economic environment.
4. Resolving legal problems
Jain and Fitschen, during their time at the helm of the German banking giant, have had difficulty in resolving legal problems, causing fines and litigation charges to steadily pile up.
According to FT, in the final two quarters of 2012, Deutsche’s litigation costs were €2.09bn, in all of 2013 these were €3.04bn, in 2014 they were €1.57bn, and in the first quarter of 2015 they were €1.54bn.
What has made the legal situation even more unfavourable to Jain and Fitschen’s image, is their involvement in major legal proceedings. Jain was involved in running Deutsche’s investment bank from 2004 to 2012, a venture which has proved to be a major source of legal trouble for the company. Fitschen too has been taken to court in a case of false testimony, although he had denied charges.
5. Language trouble
Jain has also mentioned his inability to speak fluent German as a major road block, in engaging with share holders or, as the Wall Street Journal reports, gaining acceptance in parts of Germany’s tightknit financial and political communities.
According to a Reuters report, Jain struck an undeniably awkward pose at this year’s AGM, giving a speech in English while German law required that it be done in German. To bridge the gap, the bank cut Jain’s microphone and ran a German voice-over, triggering a surge of murmurs from the crowd of shareholders and journalists. Mr. Jain spent months travelling the country and taking German-language lessons, something he never mastered. He cultivated relationships with senior politicians in Berlin.
6. German regulator wanted the two gone
6. German regulator wanted the two gone
The German regulator, known as BaFin, pressed for Anshu Jain and Jürgen Fitschen to step down as co-chief executives of Deutsche Bank because of unhappiness over the way they had handled an investigation into alleged manipulation of benchmark interest rates by bank employees, the New York Times said.
Jain and Fitschen were not accused of taking part in the manipulation, which occurred while Jain was head of the Deutsche Bank investment bank. But United States and British authorities complained in public statements that Deutsche Bank had been slow to provide information and had kept incomplete records, the NYT report said.
