Here’s why fixing Deutsche Bank is one of the toughest jobs in banking

You’ve got to feel for John Cryan.

The CEO of Deutsche Bank inherited a gargantuan task.

The bank had to assure the market it could pay the coupon on its bonds not that long ago, a remarkable position to be in for a bank of its size.

Shareholders just voted against one of its compensation plans.

It is being investigated by the SECover mortgage securities it traded in 2013. The Wall Street Journal last week reported that it is launching an internal investigation into a potential conflict of interest at the firm.

Some have said the bank faces “insurmountable headwinds.” Moody’s just downgraded the rating on the bank’s senior debt to two notches above junk.

JPMorgan analyst Kian Abouhossein just had a meeting with Cryan, and put out a note Wednesday on what was said in the meeting. The note is generally upbeat, as Abouhossein is bullish on Deutsche Bank, arguing that the bank could surprise on its ability to cut costs.

Still, some of the details included in the note make you realise just how tough a job Cryan has on his hands.

Like this bit (emphasis our):

John Cryan indicated that there are currently 160 projects ongoing as part of the implementation of Strategy 2020, each of these projects is fully costed. He believes these projects are on track, except reaching a workers’ council agreement in Germany, which we believe may be in H2. He acknowledged that infrastructure to front-office headcount ratio is high & should come down as more processes are automated. DB has decommissioned 500 applications in technology and aims to reduce the number of different platforms in Global Markets; the number of relational databases has come down to 4 vs. 50 in Jun-15, showing progress.

Let’s just recap that. 160 projects! They decommissioned 500 applications! They had 50 databases! Ok, you get the picture. Here is some more from the note:

DB is working to improve inefficiencies within technology which have until now led to a high staff number of 101K FTE in addition to estimated 30K external consultants. The IB (Markets+CIB) operates with 39K+ FTEs which is higher than the group staff number of GS which we see as “best in class” in employee efficiency. DB’s Global Markets division infrastructure FTE is almost the same as total JPM estimated IB division staff at GS (JPMe 18k).

In other words, Deutsche Bank has more staff working in the back office of the investment bank than Goldman Sachs has working in investment banking. Elsewhere in the note, JPMorgan estimates that Deutsche Bank’s ratio of 2.3 infrastructure staff for every one in the front office is one of the worst in the business.

“DBK CEO acknowledged that the back-office to front-office headcount ratio was very high and needs to be addressed,” the note said. “Part of the reason for the high ratio was several manual processes which he hopes would be automated over time as DB invests in IT systems.”

There is also reference in the note to Deutsche Bank changing its global markets business model from one focused on risk taking to one built around flow trading and vanilla products.

“The restructuring execution risk is high with 160 projects to be accounted for, but management is on track to meet them so far in our view,” Abouhossein said in the note.

Still, that is a lot to get through.