Deutsche Bank’s Traders Seek Clues on New CEOBy , , and
Appointment of retail banker leaves questions about strategy
Future of securities unit is core issue for Deutsche Bank
The confidence boost didn’t last long for Deutsche Bank AG’s beaten-down investment bankers.
Traders who last month reveled in a $2.7 billion bonus pool intended to lift morale were searching for clues Monday what the appointment of a German retail banker to the top of Europe’s largest securities firm means for them.
The promotion of Christian Sewing, named overnight to replace Chief Executive Officer John Cryan, ended a chaotic two weeks for the lender, but it didn’t resolve the key issue in the bank’s strategy -- how big a role it wants to play in global investment banking. Cryan had recently started a fresh review of the business but Deutsche Bank didn’t give any details on the outcome. Adding to the confusion was the departure of Marcus Schenck, the co-head of that unit who was widely considered one of two top candidates for the CEO role.
Cryan’s and Schenck’s departure is depriving Deutsche Bank of two executives with a large network of investment banking clients, employees in the unit said, asking for anonymity so they could speak frankly. While the other co-head of the business, Garth Ritchie, stayed on as sole head, his background is trading rather than dealing with clients who need takeover advice or help with stock and bond sales. That leaves Sewing with a gap that’s difficult to fill, they said.
One executive in the advisory and financing part of the investment bank said that Sewing was very much unknown to many in the investment bank. The recent noise about the leadership had affected the business, and while employees were told that the securities unit would remain a core part of Deutsche Bank, there was an urgent need for more clarity.
Paul Achleitner, Deutsche Bank’s chairman, said in an interview with Frankfurter Allgemeine Zeitung that Schenck had left because the company didn’t agree with his plan to expand the investment banking operations. Achleitner stopped short of saying what strategy he envisioned for the unit. Sewing, he said, has proven his ability to make decisions and execute.
In recent months, Sewing had expressed frustration that managers inside the bank were too afraid to be bold and take calculated risks, according to a person familiar with this thinking. In a letter to employees Monday, he said he planned to revise internal processes to allow for faster decision-making, while urging employees to regain their “hunger for business.”
In the investment bank, Sewing said he plans to pull back from areas that weren’t sufficiently profitable, while allocating capital to areas of strength. Sewing is keen to have a roughly balanced revenue share for the bank from its two core units, rather than rely on investment banking for the lion’s share, according to people familiar with this thinking.
Some bankers said they expect Sewing to cut back in trading as well as in the U.S. operations. One credit trader said there was concern that the bank would now dial back riskier businesses that it had just starting pursuing again in the past year.
Another banker said while Sewing was the less exciting of the two internal candidates -- Schenck being the other one -- his appointment was welcome because it ends the uncertainty at the top, sending the shares higher on Monday. As an insider who knows the bank well, Sewing can minimize disruption as he takes over the job and knows how to reduce bureaucracy, said this person.
Traders also expressed relief that Ritchie was staying on after Schenck left. Ritchie, who had supported the push for bigger bonus payouts to investment bank staff for 2017, knows the business well, said one investment banker who recently left, while pointing out that the trading businesses he oversaw are underperforming.
Ritchie on Monday assured employees that there would be “no near-term changes” in the unit’s management.
Sewing, meanwhile, made clear that he’s not going to give up his cost targets just to make the investment bankers happy. Setbacks like in the fourth quarter, when lower proceeds from asset sales and expenses for the one-time bonus payment forced Deutsche Bank to scrap its expense target, won’t happen again, he wrote.
“This is non-negotiable,” Sewing wrote in his letter. “Each division and each of us has to internalize this.”
— With assistance by Jan-Henrik Foerster