Deutsche Bank Names Jain and Fitschen Co-Chief Executives
Deutsche Bank AG (DBK) said Anshu Jain and Juergen Fitschen will become co-chief executive officers in 2012, ending more than two years of speculation over who would succeed Josef Ackermann at the helm of Germany’s largest bank.
Ackermann, 63, will step down at the next annual general meeting, a year before his contract expires, the Frankfurt-based bank said in a statement yesterday. Deutsche Bank plans for him to join the supervisory board and replace Clemens Boersig as chairman, the company said.
Jain, 48, a native of India who’s based in London, rose in his 16-year tenure at Deutsche Bank from fixed-income salesman to the head of the corporate and investment bank, which put him in charge of more than 70 percent of group revenue and made him a leading candidate to run the bank. Fitschen, 62, as CEO for Germany and the longest-serving Deutsche Bank employee on the board, is enmeshed in the country’s political and business affairs.
“Anshu Jain’s investment bank is still the principal profit driver at the bank and he was obviously the best candidate,” said Peter Thorne, a London-based analyst with Helvea who has a “neutral” recommendation on the stock. “It may be an issue that he doesn’t speak German and is based in London but that’s why they also named Fitschen. It’s a fantastic compromise.”
Deutsche Bank today said second-quarter net income rose 3.3 percent to 1.2 billion euros ($1.74 billion), helped by gains at the retail unit and investment banking. While the lender reiterated a goal today of 10 billion euros in operating pretax profit this year, it said the European sovereign debt crisis will make it more difficult to reach the 6.4 billion-euro target at its investment bank.
Deutsche Bank rose as much as 2 percent in Frankfurt trading, and was up 14 cents, or 0.4 percent, to 38.36 euros by 10:57 a.m. The shares fell 2 percent this year, less than the 10 percent decline in the 49-company Stoxx 600 Banks Index.
The CEO decision ends mounting speculation over the replacement for Ackermann, who turned the 141-year-old- institution into one of the world’s top five investment banks by fees and served as an informal adviser to Germany’s chancellor, Angela Merkel, during the credit crisis. Ackermann has run the bank since 2002.
Pairing Jain, an investment banker, with Fitschen, is an attempt to balance Deutsche Bank’s dual roles: A global trading house that competes with the likes of Goldman Sachs Group Inc. and gets most of its revenue abroad, and a German institution with longstanding ties to the nation’s companies and political establishment.
“I think it’s a temporary solution,” Ralph Silva, an analyst at London-based Silva Research Network, told Linzie Janis on Bloomberg Television’s “Countdown” today. “In history, there’s never been a bank that has been run by two people successfully. It can’t work.”
Deutsche Bank ducked the issue of succession in 2009 by extending Ackermann’s tenure until 2013 after the board failed to agree on a replacement.
Armin Niedermeier, a spokesman for Deutsche Bank, said the bank won’t make Ackermann, Fitschen or Jain available for interviews for this article.
The Swiss-born Ackermann helped steer the bank through the credit crunch following the collapse of Lehman Brothers Holdings Inc. without a state bailout. He counselled Merkel on the rescue of property lender Hypo Real Estate Holding AG in 2008, and stood beside Finance Minister Wolfgang Schaeuble on June 30 in Berlin to announce an agreement by banks and insurers to roll over Greek debt holdings.
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 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.
Having the trio of Jain, Fitschen and Ackermann running the bank would help the company manage regulatory issues and macroeconomic risks, JPMorgan Cazenove analysts led by Kian Abouhossein said in a note yesterday, before the announcement.
In a world “where bank managements are stretched with regulatory and macro issues, we feel the trio would be powerful in managing this difficult environment,” the analysts wrote.
While the continuity at the top of the bank may bolster the shares, there is a risk that Ackermann’s presence as chairman might keep Jain from “making his own mark” on the company, the analysts said.
Deutsche Bank periodically had co-CEOs in the 1960s, 1970s and 1980s. Boersig, 62, accelerated the search for a new leader after former Bundesbank president Axel Weber decided to join Switzerland’s UBS AG, removing a potential replacement for Ackermann and adding to pressure on the bank to map out a succession plan. UBS, Switzerland’s largest bank, plans to appoint Weber, 54, as chairman in 2013, the Zurich-based company said July 1.
Additional candidates for the top job at Deutsche Bank included Chief Risk Officer Hugo Banziger, 55, consumer-banking head Rainer Neske, 46, and Chief Financial Officer Stefan Krause, 48, people with knowledge of the deliberations have said.
Co-CEO arrangements don’t always go smoothly. At Zurich- based Credit Suisse Group AG, 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.
“Co-CEO arrangements are notoriously challenging,” Bruce Weber, a finance professor at the London Business School, said in an e-mail. “I trust Anshu will build a productive relationship with Juergen Fitschen.”
Jain, born in Jaipur in India’s Rajasthan state, joined Deutsche Bank in 1995 from Merrill Lynch & Co., following his mentor Edson Mitchell to the German bank. 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.
Jain studied economics at Sri Ram College of Commerce at Delhi University, earning a bachelor’s degree with honors. He enrolled in business school at the University of Massachusetts at Amherst, where he learned about derivatives -- financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates.
After graduating in 1985, he joined Kidder Peabody & Co., which was acquired the following year by General Electric Co. and is now part of Zurich-based UBS AG, as a research analyst. Three years later, he moved to Merrill as a derivatives strategist and then a salesman.
Deutsche Bank named Jain the sole head of its corporate and investment bank in January 2010, handing him responsibilities for the corporate finance and transaction banking units previously run by Michael Cohrs, 54. Jain helped build the bank into a bond-market leader since becoming co-head of the investment bank in 2004.
Jain’s appointment “reflects that Deutsche Bank has successfully transformed itself to become a global capital banks powerhouse,” said Weber, the finance professor. “The other German banks have struggled outside of their home markets, but Deutsche Bank stands apart, and this appointment rewards a leader responsible for their attractive position today.”
Fitschen joined the bank in 1987, and was appointed CEO for Germany, based in Frankfurt, in 2005. He joined Deutsche Bank’s management board in 2009. He is on the supervisory boards of Metro AG and Schott AG, as well as the board of directors of Kuehne + Nagel International AG.
Fitschen is also a board member at Germany’s Committee on Eastern European Economic Relations, which represents German industrial companies, insurers, banks and retailers with interests in Russia and eastern Europe. German executives on the board include Eckhard Cordes and Johannes Teyssen, the CEOs of Metro and utility EON AG, respectively, as well as Harald Schwager, a board member at BASF SE, according to the website of the group.
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