The Investors activism against Anshu Jain and Jurgen Fitschen, the Co-CEO’s of Deutsche Bank saw the resignation of both the joint CEO’s this week. Peter Sands, CEO of Standard Chartered stepped down in February this year as Investors showed displeasure over the banks performance. Other top global banks too have seen management churns over the last few years.
The fact is that the top global banks barring JP Morgan, from Citibank to Deutsche have destroyed shareholder wealth. The table below shows the performance of banks against the S&P 500. Except for JP Morgan that has outperformed the S&P 500, all other banks in the table have been gross underperformers.
Shareholders are clearly unhappy. Banks have seen bailouts in 2008 and post that have faced a series of scams from Libor Manipulation to Currency Fixing. A report by London Research Firm CCP Foundation shows that banks have paid USD 300 billion over the last five years to cover fines, litigation costs and other payments.
Investing in a banks equity was clearly a bad idea and as investors lose faith in banks, regulators will have to tighten regulations further in order to restore investors faith in both regulators themselves and the banks. Banks too will now have to get back to the basics of evaluating credit to earn a spread but with world driven by private equity and targeted lenders, banks traditional role of lending too is in doubt. In short, banks have to reinvent themselves and until then they will continue to underperform.