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Deutsche Bank May Risk Co-CEO Pitfalls for Jain, Germany

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July 11 (Bloomberg) -- Deutsche Bank AG is likely to risk the pitfalls of dual chiefs to keep investment-banking head Anshu Jain while allaying doubts in Germany about his ability to fulfill the political role of leading the nation’s biggest bank.

Jain, a 48-year-old native of India, may be named co-chief executive officer with Juergen Fitschen, 62, or another German speaker, people familiar with the matter have said. Chairman Clemens Boersig convened the nominations committee of the supervisory board yesterday to push for a two-CEO solution, said the people, who declined to be identified because the talks are confidential.

A decision would end speculation on a successor for Josef Ackermann, 63, who turned the 141-year-old-institution into one of the world’s top five investment banks by fees and acted as an informal adviser to German Chancellor Angela Merkel during the financial crisis of 2008. Still, pairing Jain with another executive carries risks because shared leadership can lead to turf battles, divided loyalty among employees and sclerotic decision making, analysts said.

“The recent track record is that dual structures tend not to be permanent solutions,” said Matthew Clark, an analyst at Keefe, Bruyette & Woods in London. “Maybe that’s what has to happen to ease the transition and is the kind of compromise that has to be made.”

Reed, Weill

At Zurich-based Credit Suisse Group, Oswald Gruebel, 67, and John Mack, 66, served as co-CEOs for less than two years, before Mack left in 2004. He became chairman and CEO of New York-based Morgan Stanley a year later. John Reed, 72, left Citigroup Inc. in April 2000 following a boardroom struggle with Sandy Weill, 78, less than two years after the merger of Citicorp and Travelers Group Inc.

Boersig, 62, is accelerating his effort to find a successor to Ackermann after former Bundesbank president Axel Weber, 54, a contender for the job, chose to join UBS AG, people familiar with the matter said last week. Investors including Hermes Equity Ownership Services, which represents more than 20 pension funds and asset managers, have urged the Frankfurt-based bank to map out a succession plan for Ackermann, whose contract expires in 2013.

Promoting Jain to CEO would mark the pinnacle of a 16-year journey from a fixed-income salesman to the head of the corporate and investment bank last year, which put him in charge of more than 70 percent of group revenue and made him a leading candidate to run the bank.

‘Very Painful’

“Even though Deutsche Bank is probably resilient enough, it would be very painful to lose Jain to a competitor,” KBW’s Clark said. “If Jain was overlooked, then he may look elsewhere.”

Fitschen would make a logical co-head with Jain because as CEO of Germany he’s enmeshed in its political and business world, the people said. He’s also the longest-serving Deutsche Bank employee on the board. Additional candidates for the CEO job include Chief Risk Officer Hugo Banziger, 55, consumer-banking head Rainer Neske, 46, and Chief Financial Officer Stefan Krause, 48, people have previously said.

Boersig plans to propose Jain and Fitschen to the supervisory board, one of the people said. The proposal has been made by the nomination committee -- which includes Boersig, Tilman Todenhoefer and Werner Wenning -- and the chairman’s committee, which includes worker representatives, “is certain” to support that model, Die Welt reported today, without saying where it got the information. The majority of the 20-member supervisory board backs Jain and Fitschen, the newspaper said.

The supervisory board, which must approve any appointment with a simple majority, is likely to convene ahead of its regular gathering before second-quarter earnings are published on July 26, two of the people said.

‘Charm’ of Solution

Deutsche 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.

“There are very few examples where dual leadership has gone well, but I can see the charm of such a solution in this case,” said Daniel Hupfer, who helps manage about $46 billion in assets, including Deutsche Bank shares, at M.M. Warburg in Hamburg. “Jain doesn’t have enough of a network in Germany and the Deutsche Bank CEO needs to be able to mix with politicians.”

Ackermann stood beside Finance Minister Wolfgang Schaeuble on June 30 in Berlin to announce an agreement by the country’s banks and insurers to roll over Greek debt holdings. Ackermann, who has run the company since 2002 and helped steer it through the credit crunch following the collapse of Lehman Brothers Holdings Inc. without a state bailout, also counseled Chancellor Merkel on the rescue of property lender Hypo Real Estate Holding AG in 2008.

Early Departure

The new leadership will take over at a time of stricter rules on capital and liquidity that make it harder for banks to generate the kinds of returns they did before the financial crisis. The bank is also integrating acquisitions, including Deutsche Postbank AG, to cut its dependence on investment banking and raise pretax earnings from consumer lending, money management and transaction banking to 50 percent of the total from 29 percent in 2009.

While Ackermann’s contract runs until the spring of 2013, he may leave earlier, people familiar with the matter have said. Deutsche Bank yesterday denied a Der Spiegel report that Ackermann told management board members at a recent meeting that he wants to become chairman. Ackermann, who has previously said he doesn’t want to join the supervisory board, hasn’t changed his position, spokesman Michael Lermer said.

The lender also called a report by newspaper Bild Zeitung today that Ackermann would leave the company “soon” if Fitschen was named co-head “total nonsense.”

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at

To contact the editors responsible for this story: Frank Connelly at;

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