Frankfurt/Paris: With speculation reviving over who will succeed Josef Ackermann as chief executive officer (CEO) of Deutsche Bank AG, the company will have to decide how German the leader of Germany’s biggest bank must be.

Crown prince? (top) Anshu Jain, head of Deutsche Bank’s corporate and investment banking unit. AFP; and the company’s headquarters in Germany. Bloomberg

The answer may reveal whether the 140-year-old Frankfurt-based institution embraces its role as a global investment bank that makes most of its money trading securities on international markets, or whether long-standing business and political ties to Germany remain paramount.

The rise of Anshu Jain, 47, to sole head of the investment bank last month put him in charge of more than 80% of Deutsche Bank’s profit and reinforced his position as a frontrunner to become the CEO. One catch: he was born in India and doesn’t speak German, a potential handicap for an executive who must negotiate the corridors of political power as well as global markets.

“Based on performance, Jain is the crown prince," said Lutz Roehmeyer, who helps manage about $15 billion (70,050 crore) at Landesbank Berlin Investment GmbH in the German capital. “But Deutsche Bank has a split personality—a global investment bank being run out of London and a German lender with a very political role. Any successor’s key challenge will be bridging these two worlds."

Deutsche Bank ducked the issue last year by extending Ackermann’s tenure for three years after the board failed to agree on a replacement.

The Swiss-born Ackermann, 62, rekindled speculation about succession in May when he told shareholders that he’s been holding “intensive" talks on the topic with supervisory board chairman Clemens Boersig for months.

Banziger, Krause, Neske

Chief risk officer Hugo Banziger, 54, a Swiss native who helped steer the bank through the credit crisis without state aid, and chief financial officer Stefan Krause, 47, who joined from Munich-based car maker Bayerische Motoren Werke AG (BMW) in 2008, are currently Jain’s main rivals for the top job, said two people familiar with the matter, who declined to be identified.

Rainer Neske, the 45-year-old head of retail banking, is a less likely choice because he lacks experience in investment banking, they said.

Jain, Banziger, Krause and Neske declined to comment for this story, as did Ackermann and Boersig, 62, according to Deutsche Bank spokesman Ronald Weichert.

Jain, born in Jaipur, Rajasthan, and educated in India and the US, joined Deutsche Bank 15 years ago from Merrill Lynch and Co. Inc., following his mentor Edson Mitchell. After the 47-year-old Mitchell died in a plane crash before Christmas in 2000, Jain took over as head of debt. He was picked to run the combined debt and equity sales and trading unit in 2004.

Fixed-income expansion

Jain helped build Deutsche Bank into a fixed-income powerhouse, more than doubling debt sales and trading revenue between 2000 and 2009. After the investment bank reported a record loss in 2008, he cut assets at the trading unit by 47%, reduced jobs by 25% and scaled back proprietary trading. The division returned to profit in 2009 and generated 78% of the bank’s pretax earnings in the first half of this year.

Jain and the bank have won accolades. Deutsche Bank was named “best global investment bank" by Euromoney magazine, an award he collected on 8 July in London, where he shared a table with Brady Dougan, the US-born chief executive of Zurich-based Credit Suisse Group AG, and Vikram Pandit, the CEO of Citigroup Inc. and a native of India.

Jain topped a list of the 100 most influential financial individuals in European capital markets by London-based business weekly and website Financial News last month, ahead of Ackermann, a past winner. Deutsche Bank became the first foreign bank to be ranked No. 1 in US fixed-income trading by market share, ahead of JPMorgan Chase and Co. and Barclays Plc, according to a survey by Greenwich Associates published this month.

Kidder, Merrill

Jain, who lives in west London with his wife and two children, studied economics at Shri Ram College of Commerce at the University of Delhi, earning a bachelor’s degree with honours.

He didn’t travel farther than Afghanistan until he was 20, when he followed his now wife to the US, where her family was moving. He enrolled in the business school at the University of Massachusetts at Amherst. After earning a master of finance degree in 1985, he started out as an analyst at Kidder, Peabody and Co., before moving to Merrill Lynch three years later.

These days Jain, trim and greying, projects the poise and confidence of a seasoned investment banker, and his speech, direct and precise, still carries a faint Indian accent. A cricket player and golfer, colleagues say he’s competitive in both work and sport, and relishes opportunities to prove his doubters wrong. He held a stake in the Mumbai Indians, a cricket team, until selling it last year.

Best candidate

Jain plans to spend €1.6 billion (9,600 crore) on hiring and technology for the global markets unit in the next two years with the goal of breaking into the top five in commodities and US cash equities.

Failing to offer Jain the top job risks driving out the “best candidate" and disappointing analysts and investors, said Peter Thorne, a London-based analyst at Helvea Ltd.

“If the German powers-that-be can’t see he’s the best man for the job, that’d be a sad day for Deutsche Bank and the German finance industry as a whole," Thorne said. “I couldn’t conceive of anyone who wouldn’t want Jain to be CEO."

The evolution of Deutsche Bank into a global institution runs parallel with Jain’s career at the firm. Since 1995, the year he joined, the proportion of revenue it derives from Germany has fallen to 25% from almost 70%, company reports and presentations show. The slice of income the bank generates from trading grew to 44% during the same span.

Global bank

Now Deutsche Bank, with two-thirds of the workforce based outside the country, promotes itself as an international firm: The word global appears more than 200 times in the 2009 annual report. On its website, the company refers to a “meritocratic tradition and culture". About 54% of Deutsche Bank’s shareholders are based outside Germany.

Jain’s role running the entire corporate and investment bank, after the retirement of co-head Michael Cohrs, 53, will test his ability to do more than manage a global trading operation. Overseeing advisory and lending to Germany’s largest companies, as well as transaction banking, will put him closer to German customers, and the politics surrounding Deutsche Bank.

Ackermann has been in the media spotlight throughout his eight years running the company. As a member of the board of Mannesmann AG, he ran afoul of public opinion and stood trial for breach of trust in 2004 in connection with the approval of more than €57 million in bonuses for executives during the takeover by Vodafone Group Plc. Ackermann, acquitted in a first trial, later settled the charges.

He fought against the image that Deutsche Bank was a “giant hedge fund", as The Economist wrote in 2004, by expanding the company’s consumer-banking and asset management operations. In the past four years, Deutsche Bank acquired Berliner Bank AG, Nuremberg-based Norisbank AG and a stake in Bonn-based Deutsche Postbank AG, as well as the private wealth manager Sal. Oppenheim Group.

He came under fire in the German press for his compensation, which amounted to €9.55 million in 2009, the highest among the country’s CEOs, according to a study, and for encouraging risk-taking with his profitability targets.

Still, he guided Deutsche Bank through the financial crisis without a state bailout, and, in the depths of the credit crunch, counselled Chancellor Angela Merkel on the rescue of property lender Hypo Real Estate Holding AG. This year, Ackermann persuaded German financial institutions, including Allianz SE and Munich Re, to contribute to a fund to help Greece during the nation’s sovereign debt crisis.

“The CEO of Deutsche Bank has a unique position and stands more in the public limelight than any other German CEO," said Klaus Schneider, head of the SdK group that represents private investors. As a London-based investment-banker, “it’ll be difficult for Jain to become CEO because he stands for a business model that is hard to sell to the public".

Deutsche Bank’s roots in Germany also mean the country’s taxpayers would ultimately have to rescue the bank should that ever become necessary, much as the UK bailed out Royal Bank of Scotland Group Plc even though the Edinburgh-based company has operations that stretch around the globe. The biggest banks in France, Italy and Spain are run by natives of those countries.

Ackermann, the subject of a television documentary that aired on 2 August, acknowledged the bank’s position in Germany.

“The special thing about Deutsche Bank is that it carries the name of the country," he told the interviewer. “We’re in a sense the representative of Germany around the world."

Some investors say that role may lessen Jain’s chances to lead the bank.

“In many ways you’re not just a banker, but also an adviser to the government and industry," said Ulrich Hocker, president of Germany’s DSW private shareholders association in Dusseldorf. “I mean it is called ‘Deutsche’ Bank after all. It’s impossible to be the Deutsche Bank CEO without speaking German. I’d recommend a crash course."

To be sure, nine of the country’s 30 biggest publicly traded companies are led by non-Germans, including two—SAP AG and Fresenius Medical Care AG—that have CEOs who speak little German. Deutsche Bank’s management board holds its meetings in English, the company’s official language since the $9 billion takeover of New York-based Bankers Trust in 1999.

Brady Dougan

Outside Germany, the closest parallel to Jain may be Brady Dougan. Dougan, 50, who ran the investment banking (i-banking) unit for three years, took over as the company’s first sole American CEO in 2007. His nationality and lack of German language skills didn’t prevent him from leading the second largest Swiss bank through the financial crisis without government assistance. The bank has a Swiss chairman, 70-year-old Hans-Ulrich Doerig.

“These businesses are all very global," Dougan said in an interview on 22 July, declining to discuss Jain or Deutsche Bank specifically. “There’s a lot going on around the world in these businesses, so that certainly has to be something that has a weighting and consideration."

In the end, Jain may be satisfied running the investment bank, said Philip Keevil, senior partner at advisory firm Compass Advisers LLP in New York. He drew a parallel with Barclays president Robert Diamond, an American who lost out on the top job at the London-based bank to John Varley.

Diamond, 59, stayed to lead an expansion of Barclays Capital, the i-banking division, including the purchase of US assets from Lehman Brothers after the New York-based firm went bust in 2008.

Deutsche Bank may pick dual CEOs, with Jain overseeing investment banking and the international business, and a German speaker running consumer banking and asset management, analysts said. Neske would be a potential candidate. The German bank periodically had co-CEOs in the 1960s, 1970s and 1980s.

While such a solution would solve the immediate succession question, a dual-CEO setup might signal to investors that the bank couldn’t find a strong enough candidate, and could also cause tension between the global investment banking and domestic commercial banking sides of the business, analysts said.

“Jain has achieved what he has and is in a very powerful position," Keevil said. “If he continues to make money, I think he is clearly in line for the top job. On the other hand, if he makes mistakes, the corporate and domestic bankers will lobby for a change."