Sewing’s appointment was announced over the weekend alongside news that Cryan would be stepping down as chief executive by the end of April.
Deutsche Bank supervisory board chairman Paul Achletiner explained that the decision to oust Cryan was based on the conclusion the bank needed a “new execution dynamic”.
“Despite his relatively short tenure as CEO, John Cryan has played a critical role in the almost 150-year history of Deutsche Bank – and laid the groundwork for a successful future of the bank,” he said.
“The supervisory board in general and I personally are grateful for this. However, following a comprehensive analysis we came to the conclusion that we need a new execution dynamic in the leadership of our bank.”
Achletiner added that Marcus Schnenk, who is currently co-deputy chief executive, would also be leaving the firm after this year’s AGM, having informed the supervisory board of his decision before Easter.
Incoming chief executive Sewing has been a member of the management board since January 2015 and president since March 2017. Since joining the bank in 1989, he has worked for the firm in Frankfurt, Hamburg, London, Singapore, Toyko and Toronto in various capacities, most recently looking after its private and commercial bank division with Postbank chief executive Frank Strauß.
Achletiner described Sewing’s appointment as the beginning of a “new era” for Germany’s biggest bank.
“In his more than 25 years at Deutsche Bank, Christian Sewing has proven himself a strong and disciplined leader. The supervisory board is convinced that he and his team will be able to successfully lead Deutsche Bank into a new era. We trust in the great ability of this bank and its many talents.”
A new era?
Under Cryan’s leadership, the bank had struggled to turn a profit, as it continued to be hampered by litigation costs. Deutsche Bank posted losses of €735m (£640m, $903m) last year and double that in 2016 (£1.2bn).
In February, it confirmed plans to spin-out and float its asset management arm, DWS, for €2bn on the Frankfurt Stock Exchange.
Despite the chief executive switch-up and proposed changes to the structure/focus of the business, JP Morgan analysts, Kian Abouhossein and Amit Ranjan, argue that the bank is still missing “a clearly defined strategy” which is what matters most for its future.
“Despite the CEO change, whether it is John Cryan or Christian Sewing or even top of their game CEOs like Bill Winters or JP Mustier, we think that without a clear strategy commitment by all parties turning DBK around will be difficult,” they said.
Deutsche Bank’s main problem, according to Abouhossein and Ranjan, is that there has been “little evidence of commitment to changing the organisation in the interests of the owners: shareholders and creditors”.
Maintaining the “status quo is not an option,” they stressed. Sewing needs to rejuvenate the bank’s cost-cutting plan, which means reducing its US operations “to free up capital, cost and reduce leverage exposure, improving ROE”.
“This would mean a shrinkage of most of [the] US [business] to US equities, US lending and rates business with some reduction in credit business,” leading to a “smaller global CIB footprint and a drive to change the culture which is shareholder driven”.
Unanswered questions
But head of Hermes EOS, Hans- Christoph Hirt, said questions remain for Deutsche Bank chairman Achleitner ahead of the German bank’s AGM.
While Hirt said he found Sewing a “credible, internal candidate”, he noted that this is the third chief executive change during Achleitner’s six-year tenure.
“He hand-picked John Cryan in mid-2015, after overseeing the previous co-CEOs for three years,” he said. “Why was it necessary to appoint a new CEO at this point (Cryan’s appointment was scheduled to end in 2020)?”
Achleitner will also need to address what this latest u-turn means for the bank’s strategy, specifically the role of its investment bank.
The “unusually high turnover” on Deutsche’s supervisory board is another issue that warrants addressing.
“We look forward to discussing these questions with the chair and hearing from the new CEO how the bank plans to create value for shareholders and other stakeholders in the foreseeable future,” said Hirt.
Deutsche Bank will hold its AGM on 24 May in Frankfurt.
