World Economy

Deutsche Bank Still Faces Hard Times

Deutsche Bank Still Faces Hard TimesDeutsche Bank Still Faces Hard Times

The shock resignation of Deutsche Bank’s two chief executives may offer Germany’s biggest lender a fresh start but will not be a cure-all for its ills, observers said on Monday.

Investors hailed the announcement that Deutsche Bank’s co-chief executives, Anshu Jain and Juergen Fitschen, are stepping down as the European financial giant faces a wave of scandals and has failed to meet profit targets this year, AFP reported.

Deutsche Bank shares shot up nearly six percent higher on the Frankfurt stock exchange on the news in a generally weaker market.

Jain, 52, will quit at the end of June, while Fitschen, 66, plans to stay on in the job until after the group’s annual shareholder meeting in May 2016. Supervisory board member Britain’s John Cryan, 54, will initially take over from Jain in July as co-CEO and will then become sole chief executive after Fitschen steps down.

“The reputation of a bank that is so important for the German economy has reached rock bottom,” said the daily Frankfurter Allgemeine Zeitung.

 Shareholder Wrath

The two CEOs have been in their current positions since 2012 and their contracts had been due to run through March 2017. But at Deutsche Bank’s annual meeting last month the two faced shareholder wrath over the string of scandals and poor profitability.

The group is mired in around 6,000 different litigation cases and was last month fined a record $2.5 billion (2.2 billion euros) for its involvement in an interest rate-rigging scandal. It has also failed to meet its profit targets for this year so far.

Despite substantial efforts to cut costs and diversify, Deutsche Bank – which employs a workforce of more than 98,000 and has annual revenues of some 32 billion euros – continues to lag behind its Anglo-Saxon rivals.

Jain, a former star in the investment banking scene, has seen his image lose its luster amid a string of scandals and alleged fraud that occurred at Deutsche Bank’s investment division while he was in charge and which continue to cost the group money.

He has never really learned German properly and his perceived arrogance was seen as driving a wedge between the investment banking operations in London and Deutsche Bank’s more traditional activities in Germany.

Fitschen, who knows the German banking sector inside out, has also seen his star wane recently. He is currently on trial in Germany on allegations he gave misleading testimony in 2002 and faces prison.

But whether the incoming CEO Cryan will have any greater chances of success remains to be seen.

The 54-year-old Briton won investors’ respect by helping lead UBS Group back from the brink of collapse as chief financial officer during the credit crisis.