Sun. Jun 16th, 2019

Top Deutsche Bank Investors Focus Their Discontent on Chairman

(Bloomberg) — Some top Deutsche Bank AG investors are growing increasingly dissatisfied with supervisory board Chairman Paul Achleitner.

Representatives of the Qatari royal family, Cerberus Capital Management and HNA Group have internally discussed pushing for Achleitner’s exit before his term expires in 2022, according to people with knowledge of the matter. While the shareholders have voiced their frustrations among themselves, it’s unclear how they’ll vote at the bank’s annual general meeting on Thursday.

The deliberations add to signs that Deutsche Bank will face tough questions when investors and management convene. The biggest shareholder advisory firms are urging investors to vote against last year’s actions by the supervisory board and the management board — a rejection that would amount to an embarrassing vote of no confidence but wouldn’t force leaders to step down. BlackRock Inc., the bank’s largest single shareholder, has mandated a specialized company to vote in its stead at what’s shaping up to be one of the most tense annual meetings of the season.

Senior officials at the European Central Bank have also suggested that the chairman’s exit would be in the best interest of the bank, other people said. While the final decision rests with shareholders, doubts are rising among ECB senior officials as to whether he is the right person to continue to oversee the bank, they said.

Achleitner, an Austrian who took the role seven years ago, has overseen a series of botched turnaround efforts and management changes that have failed to restore growth and profitability. Shares of the lender have lost about 40% in the past year, falling to a record low on Monday, after revenue contracted for nine straight quarters and Chief Executive Officer Christian Sewing cut the revenue outlook for 2019.

Achleitner, Deutsche Bank and Cerberus declined to comment, as did a spokesman for C-Quadrat, the asset manager that oversees HNA’s stake. Representatives for the Qatari royal family couldn’t be reached. An ECB representative said its bank supervision division “has no view on the matter.”

Sewing, the latest CEO handpicked by Achleitner, has failed to restore investor confidence after unveiling a new restructuring plan a year ago. At the urging of the German finance minister, he even explored a merger with Commerbank AG, underscoring the difficulty of ending what Deutsche Bank has called a “vicious circle” of declining revenue, sticky expenses, a lowered credit rating and rising funding costs. After talks collapsed last month, the CEO has been working on another strategic update that’s likely to include more cuts around the edges of the investment bank, people familiar have said.

It’s not the first time that Achleitner has come under pressure. Confronted with criticism about the bank’s performance last year, he accepted partial blame while stressing the management board’s responsibility for setting strategy. The chairman has pushed back against cuts to its investment banking unit, saying more recently in a newspaper interview that the division doesn’t need a fundamental shift in strategy, while ultimately deferring to the management board on this question.

The unit, led by Garth Ritchie, has long been a sore spot because it consumes the most capital and pays out the lion’s share of bonuses. At the same time, it is by far the least profitable among Deutsche Bank’s three main divisions. Several top shareholders as well as some regulators have been disappointed with the bank’s cuts to the business and see them as insufficient, people familiar with the matter have said.

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