Deutsche Bank CEO sees better days – in 2020

John Cryan faces the briefest of honeymoons as chief executive of Deutsche Bank.

Investors believe the Briton is better equipped than his predecessors to revive the fortunes of Germany’s largest bank. As a result, its shares rose eight per cent on Monday after the weekend departure of co-executives Anshu Jain and Juergen Fitschen.

But Cryan will be tested at the end of July when he has to update investors on a turnaround plan — Strategy 2020 — that he was heavily involved in creating in his role as a nonexecutive director and which has so far failed to win them over.

Fed up with weak returns, shareholders want Deutsche Bank to be more ambitious about slashing costs and are hoping Cryan will use his experience of restructuring Swiss bank UBS in the wake of the financial crisis to accelerate the plan to cut 4.7 billion euros ($6.6 billion) of costs in five years. “The details of the cost reductions in Strategy 2020 still need to be communicated, but we would also like Cryan to increase that target given his reputation on cost control,” said Tom Van Kempen, senior equity analyst at European fund management firm Candriam, which holds shares in the bank.

“Ideally, we would like Deutsche Bank to distance itself further from its focus on investment banking: more closure of underperforming activities, less reinvestment in the business, more closures of smaller geographies.”

Under Jain and Fitschen, Deutsche stuck to an expensive universal banking model and the bank is now playing catch-up with rivals such as UBS and Barclays, which have moved faster to axe unprofitable business lines.

Deutsche’s Strategy 2020, which aims for a return on tangible equity of at least 10 per cent by 2020 compared to the previous target of 12 per cent for 2015, involves shrinking parts of its investment bank and selling off its Postbank retail unit.

Jain and Fitschen had originally favoured a more radical plan to get rid of Deutsche’s entire retail business and become a pure investment bank and wealth manager, but they dropped it due to regulatory hurdles and opposition from Berlin, supervisor concerns and one trade union.

Cryan is expected to stick to the current plan and focus on its execution when he presents to investors next month.