Deutsche ousts CEO; Banks battle for retail deposits

Receiving Wide Coverage ...

Cryan out: Deutsche Bank on Sunday removed CEO John Cryan and replaced him with 25-year bank veteran Christian Sewing, currently co-head of the bank’s retail division. The change, widely anticipated, takes effect immediately.

The move “presages a lower-profile Deutsche Bank” and “signals a less ambitious future after years of grim financial results and sputtering attempts to regain a spot among global investment-banking powerhouses,” the Wall Street Journal comments. It also moves the bank “closer to a potential merger with another European bank, possibly in Germany. A smaller, more regionally focused Deutsche Bank could make a match-up more pragmatic.”

Investors in Deutsche were happy to see a resolution of the two-week “leadership crisis” between Cryan and chairman Paul Achleitner, which had “threatened to destabilize Germany’s largest bank.” Garth Ritchie will become the head of DB’s corporate and investment bank and was named deputy CEO along with executive board member Karl von Rohr. It was reported late last week that Ritchie was looking to leave the bank. Financial Times here and here, New York Times

Marcus Schenck, co-head of investment banking, has also talked about leaving the bank.

Wall Street Journal

Networking: PayPal is quietly putting together a “hodgepodge of small banks that stay anonymous and behind the scenes” in order to offer banking services through its digital wallet. PayPal, a nonbank that isn’t a member of the Federal Deposit Insurance Corp., plans to offer deposits insured by other banks, debit cards and direct deposit of customers’ paychecks.

Wider review: Wells Fargo is reviewing its sales practices in auto lending and the ancillary services it provides borrowers in order to “get ahead of heightened regulatory interest in the area,” the paper reports. The move could include “potential refunds” to customers who buy “aftermarket” products at dealerships when they buy a car, such as extended warranties and roadside assistance.

Life after Treasury: Former Treasury Secretary and Federal Reserve Bank of New York President Timothy Geithner has done well for himself since leaving government service. President of Warburg Pincus since 2014, “he wasn’t the first former Treasury secretary to go from Washington to Wall Street. Unlike predecessors, however, his arrival wasn’t a homecoming. He had never worked for a financial firm or a bank.”

Financial Times

Shrinking margins: Competition is heating up in the battle for U.S. retail bank deposits, the paper reports, highlighted by Popular of Puerto Rico’s new online instant access account that pays 2% annually. The move “threatens the ability of the country’s biggest lenders to continue paying next to nothing for their funds while pushing up rates for borrowers” and “intensifies concerns on the eve of bank earnings season about the direction of a key profit measure for lenders — their net interest margins.”

New York Times

No autographs: Having to sign your name at a credit card terminal is about to go the way of the dial telephone, as the four largest networks stop requiring signatures later this month. “The signature has really outrun its useful life,” says Linda Kirkpatrick, head of U.S. business development at Mastercard. Individual merchants may still require them, however.

There’s got to be a better way: The best way to handle the student loan default crisis, according to Susan Dynarski, a professor at the University of Michigan, is to adopt payroll withholding. She blames the crisis on the loan servicers. “As it is, we have a punishing system of garnishment in place for student loans,” she writes. “It makes little sense to have the federal government seize money from these most vulnerable families while shying away from a sensible system of payroll withholding for active workers.”

Quotable

“It’s a super-competitive environment. With growth in assets comes a need for deposits. We wanted to put a rate out there that was attractive, that was going to attract money.” — Greg Demas, director of retail transformation at Popular, about its new 2% deposit account.