CEO Shake-Up

Power Struggle Leaves BHF Bank in Crisis

BHFBank-imago-Hannelore Foerster
Few German banks have had as tumultuous a history as BHF Bank.
  • Why it matters

    Why it matters

    BHF Bank has a turbulent history. A leadership change has plunged it back into crisis just as many had thought the bank’s worst days were behind it.

  • Facts

    Facts

    • BHF Bank has had four owners in the past 15 years, including the Dutch bank ING, German banks Sal. Oppenheim and Deutsche Bank.
    • The investment group RHJ acquired a majority stake in the bank in 2014.
    • BHF Bank rose to become one of the pillars of Germany’s finance sector in the 1970s, but has struggled in the past decade.
  • Audio

    Audio

  • Pdf

There was an oppressive silence in the BHF Tower, located near the downtown of Germany’s financial capital Frankfurt.

One day after an abrupt and dramatic change in top management at the storied BHF Bank, the anxiety felt by employees at a company meeting on Wednesday morning was almost palpable.

“We are in a state of shock at the bank,” said one attendee.

A leadership struggle has deeply shaken this historic private bank, which dates back to 1854 and has long thrived on discretion rather than publicity stunts. The bank has had a checkered history in recent times, changing hands four times in the past 15 years.

Many had thought the bad times were in the past. But this week’s events have once again exposed major rifts between different camps. Employees fear the management dispute is scaring away customers, and that the upheaval has upset a delicate balance of power they thought had been holding at the bank over the past year.

“It’s extremely harmful to BHF’s banking business to be hearing new background music again,” said one BHF banker.

“We have put a 10-year success story at risk,” said another banker.

The crisis comes down to a power struggle between two men: Supervisory Board Chairman Leonhard (“Lenny”) Fischer, a charismatic former investment banker whose investment group took over the BHF last year, and chief executive Björn Robens, a strong-willed traditional retail banker who was a holdover from the BHF’s previous owners, Deutsche Bank.

On Tuesday, the supervisory board, which has the power to hire and fire managers, announced that Mr. Robens was stepping down over “disagreements” on strategy. Alexander Mettenheimer, a 63-year-old former Merck-Finck CEO, will replace him in the interim. A new chief executive is to be found within a year.

The news came as a surprise to employees and shareholders alike. It comes just one year after the takeover of BHF by an investor group led by Mr. Fischer’s investment company, RHJ. In the past year, Mr. Robens had sought to consolidate power and prevent Mr. Fischer from having a say in the bank’s running.

Both camps are now melodramatically accusing each other of attempted coups and of wheeling and dealing over the past year.

“It's extremely harmful to BHF's banking business to be hearing new background music again.”

BHF Bank Employee

In addition to the clash between Mr. Robens and Mr. Fischer, there is also a divide among shareholders. While the Chinese major investor Fosun, with its 20 percent of share, had backed the departing Mr. Robens, the billionaire investor Stefan Quandt sided with Mr. Fischer.

The leadership question is not the only point of contention that has opened up. Shareholders are also refusing to approve a capital increase proposed by Mr. Fischer.

At the employee meeting, Mr. Fischer attempted to offer a plausible explanation for Mr. Robens’ dismissal. The CEO had behaved like a Sun King at the bank, he said. He had tied the success of BHF too closely to his own performance and created a climate of fear in the process. Mr. Fischer argued that it was high time that management responsibility be distributed more broadly.

A power struggle had clearly opened up. Mr. Fischer wanted to have a bigger say and help shape the company. Mr. Robens opposed this. After all, he said, he had led BHF through a turbulent period prior to the sale to RHJ, helping the troubled bank get back on its feet after the 2008 financial crisis.

Under Mr. Robens’ leadership, the bank underwent a relatively smooth reorganization. But Mr. Fischer said he was concerned about influence, fearing that a one-man show could pose a major threat to the bank.

On the other side, Mr. Robens’ supporters accused Mr. Fischer of meddling in the bank’s operations in a way that was detrimental to the lender. Supervisory boards typically sign off on strategic decisions at German companies, but are not involved in the day-to-day operations.

Mr. Robens’ supporters pointed, for example, to a failed proposal by Mr. Fischer to integrate two subsidiaries, Kleinwort Benson Bank and Kleinwort Benson Channel Islands, into BHF. The enterprise failed because the German deposit guarantee fund would have demanded higher fees.

Another of Mr. Fischer’s ideas was to dovetail the corporate business of Quirin Bank, in which the group also holds a stake, with BHF. But an audit uncovered serious compliance problems that doomed the project.

While the Robens camp became incensed over such interventions in the day-to-day management, the Fischer faction downplayed the incidents, claiming that they were merely business exercises.

 

Source: Quirin Läppert für Handelsblatt
The head of the BHF supervisory board, Leonard Fischer, fired his chief executive Björn Robens, pictured, in a leadership struggle. Source: Quirin Läppert für Handelsblatt

 

Mr. Fischer, for his part, felt uneasy about Mr. Robens’ good relationship with Fosun. When Mr. Fischer and RHJ wanted to take over BHF, it was Mr. Robens who succeeded in bringing the Chinese firm on board as a counterweight.

That counterweight had paid dividends in the past. Mr. Fischer had proposed making himself co-CEO in the spring, in a bid to curb Mr. Robens’ power, but it was Fosun that blocked the appointment. Mr. Fischer’s allies believe this was at the behest of Mr. Robens. It was after this that the decision was made to unseat Mr. Robens.

The gloves came off on Monday, when Mr. Fischer apparently spoke with Mr. Robens in Frankfurt for only a few minutes. The decision over his removal had already been made, and the CEO was now offered the choice of three pre-prepared press releases, which portrayed his departure in a more or less friendly light.

Mr. Robens opted for the least friendly of the three, because it was true. The public was informed that he was relieved of his duties because of “differences in opinion on questions of development and management of the company.”

The news of Mr. Robens’ sacking, which was formally approved in a supervisory board meeting on Tuesday, got round quickly. It triggered sharp protests from second-tier executives, including the division heads.

In emails to Mr. Fischer and the entire supervisory board, they warned that the move would harm the bank’s reputation and be bad for business. The move would cause “collateral damage that is difficult to assess,” one of these emails read.

Despite these protests, even the employee representatives sitting on BHF’s supervisory board voted unanimously for Mr. Robens’ dismissal. The only dissenting voice came from Fosun.

The phones have been ringing off the hook since the dispute escalated, according to bank insiders.

Mr. Fischer acknowledged to confidants that the management change would destabilize the bank in the short term, but claims he had no other choice.

“If I had seen a different route, I would have taken it,” he told a group of employees, and assured them that the bank’s strategy would not change.

Another disturbing factor was added to the mix on Tuesday. At its shareholders’ meeting, the holding company’s management failed to achieve the three-quarters majority required to push through a capital increase. In addition to Fosun, another major shareholder also voted against giving the bank carte blanche to issue new shares.

Mr. Fischer still has a lot of convincing to do.

 

Laura De La Motte is an editor with the Handelsblatt finance desk and a specialist banking correspondent. Michael Maisch is deputy chief of Handelsblatt’s finance desk in Frankfurt. Oliver Stock is head of Handelsblatt’s online operations. Anke Rezmer covers the investment fund industry for Handelsblatt out of Franfurt. To contact the authors: delamotte@handelsblatt.commaisch@handelsblatt.com, stock@handelsblatt.com and rezmer@handelsblatt.com

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