10 Years of Scandals - Deutsche Bank Chief Achleitner Finally Leaves
Recently, the shareholders of Deutsche Bank voted for a new Chairman, Alex Wynaendts, to replace Paul Achleitner. As the largest banking institution in Germany, Deutsche Bank operates in 58 countries and plays a systemically important role in the view of the Financial Stability Board. However, the bank has been plagued by scandals over the past decade and is considered to be a despicable presence by the banking industry.
During Achleitner's tenure, Deutsche Bank has experienced a sharp decline and scandals. In 2015, the bank was fined US$2.5 billion for manipulating interest rates and lost €6.2 billion in the third quarter of that year. Besides, the US Department of Justice demanded that the bank settle an improper sale investigation and pay US$14 billion in 2016. Then, the bank used stock trading to launder US$10 billion in Russia and was fined $600 million by US authorities in 2017. In addition, Deutsche Bank was raided by police in connection with an investigation into the Panama Papers and money laundering in 2018. Finally, it was searched by prosecutors, federal police, and other officials in connection with suspected money laundering in 2022.
As you can see from this chart, Deutsche Bank's share price has fallen sharply since the financial crisis in 2008 and has never reached its previous high prices. In addition, starting with the scandal in 2015 and 2016, Deutsche Bank shares fell again and continued to fall below $25 per share. Then, the share price dropped dramatically below $10 per share in 2018 and remained in this miserable state for more than two years. As a result, general observation shows that the years of scandal have caused Deutsche Bank's share price to plummet by around 70% and lost the trust of investors.
Graph 1: The Net income of Deutsche Bank
Source: Wikipedia
The graph shows clearly that the continuation of the scandal has led to net income becoming negative. Particularly, since the scandal, net income has only been in a non-loss position for two years from 2015 to 2020, but the net income reached in 2018 and 2020 is also well below the net income before the scandal. Although Achleitner has been under fire from shareholders during his decade, he is also trying to save Deutsche Bank. For example, Achleitner fired CEO John Cryan and hired Christian Sewing to re-fix the company in April 2018 and many of Sewing's measures broke Deutsche Bank's vicious cycle and restored the bank's A rating.
Before Achleitner's resignation was announced, the bank had maintained its profitability for seven recent quarters, the longest streak since the scandal began in 2012. It has been said that Achleitner's greatest achievement was surviving Deutsche Bank for ten years, but he failed to grasp the crises and challenges facing the bank from the start and to realise the ambition and vengeance with which he entered the bank. Over the past few years, Deutsche Bank has undergone many management changes and has laid off many staffs to cut costs, but these have not restored its former vitality. In conclusion, if Deutsche Bank is to return to its former level, it should actively reorganise and regulate its operations and staff to avoid a recurrence of the scandals that have plunged the bank into constant crises.
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References/ Wide Reading
https://www.ft.com/content/06158598-daa0-4560-b072-a57bcbd7697c
https://www.dw.com/en/deutsche-banks-biggest-scandals/a-54979535
https://en.wikipedia.org/wiki/Deutsche_Bank