NEW YORK (TheStreet) -- Deutsche Bank's (DB) - Get Report stock surged on Monday as an investment adviser applauded the appointment of a former UBS executive to succeed the two co-CEOs who resigned amid investor complaints and a string of regulatory fines.
John Cryan, the finance chief who helped Switzerland's UBS navigate the financial crisis and its aftermath was named CEO on Sunday after Jurgen Fitschen and Anshu Jain decided to leave their posts early.
Fitschen, 66, and Jain, 52, were contracted to lead the bank through March 2017 but offered their resignations amid investor dissatisfaction with the bank's performance. The Frankfurt-based company's earnings last year were 74% lower than before the financial crisis, and Deutsche agreed to pay $2.5 billion in April to settle claims that employees helped rig a benchmark interest rate.
"It had become increasingly apparent in recent months that refreshment at the top of the management board was necessary in order to regain trust of investors and other stakeholders," Hans Christoph-Hirt, director of London-based advisory firm Hermes Investment Management, said in a statement Monday. Hermes was among shareholders who signaled a lack of confidence in management at the bank's annual meeting in May and had questioned, specifically, the leadership of Jain and Fitschen.
Hirt said Monday that the firm welcomed the departure of the two executives, "as it facilitates the refreshment of the management board which, in our view, is necessary," as well as the appointment of Cryan.
Deutsche Bank rose 6% to $32.48 in New York on Monday morning, the highest intraday price since May 21.
Deutsche Bank's departing co-CEOs, Anshu Jain, left, and Jurgen Fitschen. Source: Deutsche Bank
Jain will step down on June 30, the bank said in a statement. Fitschen will continue as co-CEO through the company's general meeting on May 19, 2016, to "ensure a smooth transition," Deutsche Bank said. Cryan will also serve as co-CEO during that period, starting July 1, and hold the role by himself after Fitschen's departure.
"Their decision to step down early demonstrates impressively their attitude of putting the bank's interests ahead of their own," Paul Achleitner, chairman of Deutsche Bank's supervisory board, said in the statement.
Cryan, a graduate of the University of Cambridge, has been a member of Deutsche Bank's supervisory board since 2013, where he served as chairman of the audit committee and a member of the risk committee. He was president of the European division of Temasek, the Singaporean investment company from 2012 to 2014 and chief financial officer for UBS (UBS) - Get Report from 2008 to 2011, Deutsche Bank said.
"John is not only a seasoned banker with extensive experience in financial matters but also espouses the professional and personal values required to advance Deutsche Bank," Achleitner said. "He knows the bank well, and we are convinced that he is the right person at the right time."
Becoming CEO "is a profound honor for me," Cryan said in the statement. "Deutsche Bank is a special institution. Our future will be defined by how well we deliver on strategy, impress clients and reduce complexity."
Frustration with the bank's performance prompted about 39% of investors at May's annual meeting to vote against ratifying the actions of the two co-CEOs during 2014. Under German law, the ballot functions as a vote of confidence but doesn't absolve management of potential liability.
The $2.5 billion settlement to which Deutsche agreed earlier this year involved claims related to benchmark rates including the Libor, a global standard for products including mortgages and student loans. Most of the money was to go to U.S. regulators: Deutsche Bank said it would pay $600 million to the New York State Department of Financial Services, $800 million to the Commodities Futures Trading Commission and $775 million to the U.S. Department of Justice. Another $340 million was allocated to the United Kingdom Financial Conduct Authority.
At the end of May, the bank announced another $55 million settlement with the U.S. Securities and Exchange Commission to resolve claims it failed to properly value some securities in the immediate aftermath of the financial crisis in late 2008 and early 2009.
Net income in the first quarter dropped 49% to 559 million euros, eroded by 1.5 billion euros in legal expenses, primarily to settle the interest rate-rigging claims, the bank said.
Jain noted the regulatory challenges in a speech at the company's annual meeting and acknowledged that he and Fitschen had been unable to finish addressing them by this year as they had intended.
"Resolving legacy litigation matters has taken longer and been very costly," he said. "For the banking sector as a whole, the legacy burden has been unprecedented for this or any industry, particularly in the U.S. Since the crisis, the world's major banks have paid out over 100 billion euros in fines and settlements."
Still, he promised, "we are working systematically, and doing everything we can to resolve the outstanding issues."
Deutsche Bank posted earnings of 1.67 billion euros last year, compared with 6.47 billion euros in 2007, the last year before the financial crisis.