According to a news report by Barron’s, Deutsche Bank’s looking for a lifeline to help its failing stocks, and a new CEO may not be it. This week, the finance industry’s attention was captured by the news of the bank’s Chairman Paul Achleitner reported to be looking for another Chief Executive Officer to head the beleaguered bank and steer it out of the troubled waters in which it finds itself.
While the current CEO John Cryan may not be leaving immediately, it still does not mean that getting a new CEO is going to help the struggling company. While other financial giants have reached new highs, Deutsche Bank’s stocks are still below its 2007 high. And this year, the company has already seen a drop of 30% in its share price. The company’s price-book ratio is currently at 0.4, which is lower than even its competition Commerzbank, which has a ratio of 0.5.
According to CFRA’s analyst, Firdaus Ibrahim, the escalation of tensions between the chairman and the CEO of the bank, and the subsequent maneuvering about the CEO’s job has only created more uncertainty about what direction the company is going to take.
And while some investors look at Cryan’s departure as a positive move, MainFirst’s analyst, Daniel Regli says the industry is being unfair to the current CEO. Cryan, a UBS veteran, was hired to clean up the company. This meant streamlining the bank, cutting costs, sorting out the legal troubles the company was facing, and much more.
Cryan started off as Co-CEO in 2015, and took sole responsibility as CEO in 2016. That very year, the company was hit with a $7.2 billion fine by the Justice Department in the US to settle the investigations into mortgage-securities issues that took place during the financial crisis. Then, the company was faced with a massive stock sell-off thanks to this fine.
It doesn’t help that Deutsche Bank’s COO Kim Hammonds called the bank the most dysfunctional place in which she’s ever worked. And the issues with regard to disproportionate bonuses being paid out. Or the negativity within the company which has led to back-stabbing and finger pointing. The company’s culture seems to be so full of negativity that people don’t want to work there.
And on the operational side of things, revenues have fallen 10% to 12% in the last two years. And this is not just because of the internal chaos. The strengthening Euro has meant that the company has had to take a hit on its first quarter revenues in its securities division. Other issues which have been an industry-wide challenge is lower trading activity as well as currency headwinds causing a drop in already weak revenue streams.
While a few big shareholders have expressed impatience with John Cryan – who stated that he is completely committed to the bank – there are many analysts and investors who feel that it is not Cryan who is the problem. According to them, it is the Chairman himself – Achleitner – who is to blame for the mess the company is in, and getting in a new CEO will only make the situation worse.
What the company actually needs, according to Regli, is a stabilization of the company’s top executives so that they can give better direction to the bank.
CFRA currently has a “sell” rating on Deutsche Bank’s stock and the firm has cut its share price target to €10.50 ($12.97), which is down from the previous number of €11 ($13.57). MainFirst also have given the bank a “sell” rating, with a share price target of €10.50 ($12.97).