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Deutsche’s gamble: a future without Anshu Jain?

Deutsche’s gamble: a future without Anshu Jain?
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First Published: Wed, Mar 09 2011. 12 39 PM IST
Updated: Wed, Mar 09 2011. 12 39 PM IST
Frankfurt: As it pushes to renew its conservative roots, Deutsche Bank may be about to take a risky bet: sidelining its rainmaker in the contest for the top job.
Anshu Jain, the 48-year-old head of investment banking, is seen by many as a natural successor to current chief executive Josef Ackermann. Except for the financial crisis, Jain’s division has for years generated from 70% to 80% of the bank’s profits.
But key members of the bank’s supervisory board -- tasked with appointing the next chief executive -- are currently not in favour of the Indian-born banker for the top job, a person familiar with the supervisory board’s thinking told Reuters. The supervisory board would like to see Deutsche as more of a traditional bank. It has ”actively supported” moves to crimp Deutsche’s dependence on investment banking and is pushing the expansion of more stable but less lucrative businesses such as retail banking and wealth management, said three sources, who would not be named because they are not authorised to speak to the media.
Deutsche Bank recently bought retail lender Deutsche Postbank and Luxembourg-based wealth manager Sal. Oppenheim, acquisitions that Ackermann says will help pare back investment banking’s share of profits to 60% by 2013.
The push for a more conservative strategy reflects widespread suspicion of investment banking in Germany and beyond. Since the financial crisis, investment bankers have been dubbed the “unacceptable face of banking” by some. It also offers a glimpse into tensions that have dogged Deutsche Bank for the best part of 20 years. Neither Ackermann nor members of the supervisory board have publicly expressed a preference for a particular candidate, and the issue of succession won’t be formally decided until closer to 2013, when Ackermann retires.
But the next boss of the 141-year-old lender will need two-thirds majority approval from the 20-member supervisory board, which has 10 German labour representatives and 10 shareholder representatives.
The qualities needed to become chief executive were hashed out at a meeting last year on the shores of Lake Tegern, nestled among the Bavarian Alps, with key members of the supervisory board and Ackermann himself in attendance, a person familiar with the meeting said. The group decided that the next candidate needs to be another Ackermann: somebody who is respected by staff and by clients, but who also can find acceptance in political circles in Berlin and the German corporate establishment. Key members of the supervisory board believe this counts Jain out, supporters and opponents of a Jain candidacy told Reuters on condition of anonymity.
In a written statement Deutsche Bank said selecting the CEO is a task which the “supervisory board is pursuing in an orderly and professional manner. A decision will be taken when the time is right. There is no urgency, given that Dr. Ackermann’s contract runs for another two years.”
Barclays Solution?
Investors, though, are sure to worry that the move could alienate the hard-charging Jain. Supervisory board chairman Clemens Boersig knows this, according to two people familiar with the supervisory board’s thinking, and is working on ways to retain Jain and his colleague, Chief Risk officer Hugo Baenziger. In the end, however, ”the supervisory board believes everybody is replaceable,” a member of the supervisory board said on condition of remaining anonymous. The board feels it is too dangerous for the bank to rely on any one person. ”You cannot be held to ransom,” another person, who is familiar with the supervisory board’s thinking, said.
Jain, who would not comment on the issue of succession, could well stay. He has had a hand in hiring most of the key staff at the investment bank, and his considerable stake in Deutsche in the form of shares and options gives him a vested interest in the place. But if he does walk, the bank hopes one of his proteges will step up in the same way that Jain himself emerged after his mentor Edson Mitchell died in a plane crash in December 2000. Most of Deutsche’s top 15 investment bankers have been with the firm for more than a decade, something that should instil loyalty toward the firm and not only its leader, the person close to the supervisory board said.
In private conversations between supervisory board members and Deutsche Bank executives, there has been talk of a ”Barclays” solution, named after a recent arrangement at British bank Barclays where John Varley, a Briton with connections to the political establishment, took the title of chief executive, while Robert Diamond, a powerful American investment banker, held de facto power in the background. Diamond finally took the reins from Varley two months ago.
“Perhaps one could whet Jain’s appetite for a similar solution,” one of the people close to the supervisory board said. ”In the end we may have to divide up the role among different sets of shoulders,” a supervisory board member said adding. “But we’re not yet at that stage.”
A decision on succession won’t be made this year, another supervisory board member, who declined to be named, said.
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First Published: Wed, Mar 09 2011. 12 39 PM IST