Deutsche Bank

Gunfight at the OK Corral?

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Time may be running out for Deutsche Bank's top decision makers. Source: Reuters

Deutsche Bank, the erstwhile flagship of German finance, is now headed by two outsiders, an Austrian and a Brit, and has fallen on hard times, really hard times. And yet, Deutsche’s non-executive chairman, former Goldman Sachs executive Paul Achleitner – who has been in office since 2012 and overseen the bank as it paid out billions in fines to authorities in the United States and Britain – got a new five-year contract in May as the top decision maker at the bank.

In the latest kerfuffle at the bank, people familiar with the situation say Mr. Achleitner is “irked” that the British chief executive he hired two years ago, John Cryan, has not found time to meet with officials at the murky Chinese holding company HNA that the chairman persuaded to become Deutsche’s biggest shareholder.

The latest salvo against Mr. Cryan comes after Handelsblatt first reported a few weeks ago that investors are disappointed in bank results and are growing impatient with Mr. Cryan to come up with the goods.

Mr. Cryan, whose standing as a turnaround specialist rests in good part on his reputation for integrity, may have good reasons to want "nothing to do" with HNA.

It is the type of criticism that bewilders an analyst like Stuart Graham at Anonymous Research, who was astounded that critics focused on Mr. Cryan, who has been at the bank only two years, rather than Mr. Achleitner, who has been there five years and seems to get a free pass. In a report last month entitled “Deutsche: Beyond Repair,” the Anonymous analyst noted that even with all of the bank’s problems, institutional investors still ranked Mr. Cryan 33rd among the top 50 bank executives in Europe, 13 places ahead of Commerzbank CEO Martin Zielke and 14 places ahead of Crédit Suisse CEO Tidjane Thiam.

Official bank spokesmen quickly did what they are paid to do and said of course Mr. Cryan will be meeting with HNA executives – as soon as he finds time do so. In the meantime, the tension that surfaces in news reports like this isn’t likely to go away. Mr. Cryan, whose standing as a turnaround specialist rests in good part on his reputation for integrity, may have good reasons to want “nothing to do” with HNA, as the Journal reported. The European Central Bank is mulling a probe of the Chinese conglomerate precisely to determine its suitability as a major shareholder in a European bank.

When Mr. Achleitner persuaded HNA to invest in Deutsche earlier this year, it helped steady his position as chairman of the supervisory board. Now that HNA has increased its shareholding to nearly 10 percent, it has bolstered his position further. But some of the top managers at the bank, Handelsblatt reported last week, have come to doubt that HNA really sees the bank as a strategic, long-term investment. For one thing, the investment in Deutsche through an Austrian holding company was financed in great part through bank credits and is hedged against losses – not necessarily the strategy of a long-term investor.

If there are tensions between the chairman and the CEO – whether about HNA, or strategy, or personnel – it can hardly be encouraging news for investors. If it comes to a showdown, Mr. Achleitner obviously is in the stronger position institutionally. But at this point, to fire or force out the CEO he hired and put the bank through another period of uncertainty and disruptive change, would hardly cast the chairman in a good light.

For this reason, Daniel Schäfer, the head of Handelsblatt’s finance coverage, recommended in a commentary last week that investors have more patience. “Activism is seldom a good adviser,” Mr. Schäfer wrote. “A premature replacement of John Cryan as chief executive would be the wrong step.” And this week, the Wall Street Journal’s influential “Heard on the Street” column also urged investors to be more patient with Mr. Cryan. “No other leader would escape Deutsche’s shackles more swiftly,” wrote Paul Davies, the London-based contributor to the column. “A change would risk delays.”

So it may be turning into something of an endurance contest to see who will hold out the longest – Mr. Cryan, Mr. Achleitner, HNA, or Deutsche’s long-suffering shareholders. Or it may come to a head in an open showdown like the famous gunfight at the OK corral.

Michael Maisch, Yasmin Osman and Daniel Schäfer chronicle the ups and downs at Deutsche Bank for Handelsblatt. Darrell Delamaide, based in Washington DC, adapted the latest news to English for Handelsblatt Global. To contact the authors: maisch@handelsblatt.com, osman@handelsblatt.com, schaefer@handelsblatt.com, and d.delamaide@extern.handelsblatt.com.

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