Deutsche Bank AG investors have grown accustomed to John Cryan’s blunt talk since he took the helm a year ago. He’s chastised bankers for their pay and described his employer as an “endemic underperformer.”

But some were still surprised Wednesday when the chief executive officer said unjustified doubts over Deutsche Bank’s financial strength had spooked some clients last quarter.

“He’s already made comments I’ve never heard from a bank CEO,” said Michael Huenseler, who helps oversee about 17 billion euros ($18.7 billion), including Deutsche Bank debt, at Assenagon Asset Management in Munich. “Highlighting that clients were thin-skinned may be true, but it isn’t necessarily helpful.”

Cryan is working to revive profit and meet stricter capital requirements at Germany’s largest bank, while digesting mounting fines for misconduct. Investors aren’t the only ones with a stake in his success: the International Monetary Fund said last month that Deutsche Bank’s connections to other lenders may make it the single biggest contributor to systemic risk among global banks.

As Cryan closes businesses and pulls out of countries to improve capital levels and profitability, some investors worry about the resulting loss in revenue. Should the bank’s clients balk, that could make it even tougher to earn the money needed to carry out the overhaul.

Stepping Back

“It’s absolutely essential John holds on to as much of his revenue base as possible as he goes through this very, very big change,” Christopher Wheeler, an analyst at Atlantic Equities, said in a Bloomberg Television interview. While Deutsche Bank is still “a fabulous brand,” its clients can’t ignore the overhaul and “they’re going to have to just step it back a bit until they see a calmer situation,” he said.

Deutsche Bank fell for a third day, declining 4.1 percent to 11.94 euros at 5:21 p.m. in Frankfurt and bringing the drop this year to about 47 percent. Its stock trades at the lowest ratio to tangible book value among the nine largest investment banks, data compiled by Bloomberg show.

Credit-default swaps insuring Deutsche Bank’s debt against losses, a measure that can show counterparties hedging their exposure to the lender, surged earlier this month to the highest since February, according to data compiled by Bloomberg. The contracts covered a net notional $3.8 billion of Deutsche Bank’s debt on July 22, the most for any bank, according to data from Depository Trust & Clearing Corp.

“The tough environment took its toll on our share price and on those of many other banks” in the second quarter, Cryan, 55, wrote to the bank’s more than 100,000 employees. “Doubts were raised about our financial strength. These were unjustified but they unsettled some clients and that made our day-to-day work more difficult."

While Cryan didn’t specify which clients were shaken up, each of the four units he plans to keep saw a drop in revenue in the second quarter from a year earlier. Net income plunged 98 percent.

Banks are “under pressure,” so investors have a fiduciary duty to their clients to examine their credit standing when allocating deposits, Euan Munro, head of Aviva Investors Global Services, told Manus Cranny on Bloomberg TV on Thursday.

“If banks are sitting in a weaker position, they do need to be concerned,” Munro said, without mentioning Deutsche Bank specifically. At the same time, betting against banks stocks “would be quite a dangerous activity” given their “massive discounts to book value.”

The company’s asset management business had 9 billion euros of net client withdrawals in the quarter, according to its filings. A decline at a unit catering to hedge funds -- a key part of the equity-trading business -- reflected lower average customer balances and a drop in activity, the bank said. That contributed to a 31 percent decline in revenue from equity trading, a business Cryan wants to expand.

“Market confidence is rapidly deteriorating,” said Mark Williams, a master lecturer on finance at Boston University and a former bank examiner at the Federal Reserve. “At this point, the bank can’t wait for the sluggish European economy to bail it out.”

U.S. Advantage

Debt trading revenue fell 19 percent at Deutsche Bank in the second quarter from a year earlier, even as the five biggest U.S. securities firms saw their combined revenue from that business rise 22 percent over the same period. Cryan attributed the outperformance of competitors in part to a more robust economy in the U.S., and said he expects the bank to remain the fourth-largest trader of fixed income and currencies.

“Deutsche Bank’s reputation has definitely suffered,” Ingo Speich, a fund manager at Union Investment, which oversees 268.5 billion euros of assets and is a top 25 Deutsche Bank shareholder, said in an interview in Frankfurt. “That hasn’t had a huge impact on its business, but the situation is worse than a year ago.”

The bank’s common equity Tier 1 ratio edged higher to 10.8 percent at the end of June, and Cryan said the effect of several asset sales will lift the level further this half. He has repeatedly said he doesn’t plan to sell shares, telling investors in May that the firm is making progress with its overhaul and that he’s “convinced we can realize this transformation with our own funds.”

Deutsche Bank has raised 21.7 billion euros from investors through three capital increases since the global financial crisis forced European lenders ranging from Commerzbank AG to Royal Bank of Scotland Group Plc into bailouts.

“Our balance sheet has never been in such a strong position,” Chief Financial Officer Marcus Schenck said on a conference call with analysts on Thursday. “It is the strength of our capital, liquidity and funding that affords us the flexibility to execute our strategic priorities.”

Deutsche Bank exceeds the current minimum threshold and is “well on track” to meet future requirements, Schenck said. The company still faces more legal costs as well as what the CFO on Wednesday called potentially “draconian” changes to capital standards.

“I don’t see their capital strength in danger, but it isn’t good to see that their day-to-day business is suffering,” said Huenseler. “We have to assume it will continue to suffer.”