By Peter Thal Larsen
LONDON (Reuters Breakingviews) - Deutsche Bank has a new chief executive, but he faces the same strategic void. The German lender on Sunday evening picked retail bank chief Christian Sewing to replace John Cryan. The shake-up suggests a further retreat from Deutsche’s global trading ambitions.
Cryan can have few complaints about being forced out after less than three years. Despite raising capital and cutting costs, the former UBS executive failed to revive Deutsche’s fortunes. Investment-banking revenue last year was a quarter lower than in 2015. The division’s return on tangible equity was a paltry 1.4 percent - far behind the Wall Street firms that Deutsche considers its peers. The bank’s shares on Friday were worth less than half their value when Cryan took over.
His successor is the first German national to take sole charge of the country’s largest lender since Rolf Breuer handed over the reins in 2002. Though the 47-year-old Sewing currently runs Deutsche’s private and commercial unit, he is not a typical retail banker. In more than 25 years at the bank he has managed risk and credit, and worked in London, Tokyo and Singapore.
Yet the change of leadership is hardly a morale boost. One of the complaints about Cryan was that he was too honest about the bank’s many problems. It’s hard to see Sewing delivering more convincing pep talks. The departure of investment-bank co-head Marcus Schenck will add to the unease.
Besides, Deutsche sounded out a number of senior bank executives about taking charge, and the new CEO will struggle to shake the impression that he got the job because nobody better wanted it. Chairman Paul Achleitner deserves much of the blame. In his six years on the supervisory board, Deutsche has now had four CEOs.
The problems Sewing inherits haven’t changed much under Cryan. Deutsche still has to decide whether to further shrink its investment bank. Sewing could trim businesses such as equity trading. Or he could take an axe to its U.S. operations, which JPMorgan analysts reckon account for more than a fifth of total assets but are barely profitable.
The trouble is that Deutsche’s home market is a weak base from which to rebuild. The retail business only managed a 1.9 percent return on tangible equity last year, and costs swallowed up more than 90 percent of revenue. A merger with domestic rival Commerzbank might improve returns, but would also increase exposure to the low-margin German market. Deutsche may have a new man in charge, but its strategic vacuum remains.
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