Josef Ackermann is leaving Deutsche Bank after a decade at its helm, ushering in a new era for Germany's largest bank. The new co-chief executive officers, Anshu Jain and Jürgen Fitschen, have their work cut out.
After a decade steering Germany's largest bank, the Swiss Josef Ackermann is stepping down. It was well known that he wanted former German Bundesbank President Axel Weber as his successor, but now, Ackermann will make way for not one but two successors - 49-year-old Indian-born Anshu Jain and Jürgen Fitschen, aged 63.
Ackermann won't be staying on to chair the supervisory board as he had once hoped. Jain and Fitschen, meanwhile, will have to roll up their sleeves and deal with much more than the bank's slightly fractious leadership change.
The head of Deutsche Bank doesn't have to be a German national, though he is expected to straddle the worlds of finance and politics and maintain relationships with the German government - somewhat controversially. In 2008, Chancellor Angela Merkel was criticized for organizing a dinner to celebrate Ackermann's 60th birthday.
"You have to work for this kind of trust," Christoph Schalast from the Frankfurt School of Finance and Management said. That means being discreet, not using links to high-ranking politicians to further the bank's fortunes, and operating as an open, honest consultant, he said. "The successors have to first show that they can also do that."
Share price challenge
But before they can begin cultivating ties with policymakers in Berlin, Fitschen and Jain will have to deal with another challenge - helping raise the bank's share price, a feat that Ackermann didn't manage during his time.
The bank's share price has seesawed - from around 70 euros ($88) a share when Ackermann took over, it shot up to a record 118.51 euros for a while in May 2007 but then plunged to just 15.38 euros in January 2009.
Overall, Deutsche Bank shares have lost some 60 percent of their value in the last decade. That failure has been tempered by the fact that other banks performed much worse, but it remains a failure nonetheless.
That has to do with the bank's business model, according to Ekkehard Wenger, professor for business economics, banking and credit services at the University of Würzburg. "Wherever investment banking was carried out on a large scale, the returns for the shareholders were average to very bad," he said.
In contrast, banks that operated "elementary banking models - mortgaging property whose value could be assessed or giving loans to people whose financial credit rating could be verified - weathered the crisis really well," Wenger said.
But Jain is an investment banker, and it remains to be seen if he understands the staid world of retail and corporate banking, and whether he can back up that knowledge with sufficient capital.
In the past, the investment banking business delivered the bulk of Deutsche Bank's revenues - but also the bulk of its losses. Its fingers were burned by investment banking in the financial crisis, but it lit a fire under the whole banking sector when it went from being a risk carrier to a risk trader and made all the losses it could.
The balance between the volatile investment banking business and more stable business areas may challenge, and perhaps even overwhelm, the new management team. Reinhard Schmidt, professor of international banking and finance at Frankfurt University, believes a compromise is possible: "It's possible to think of lots of relevant risks that may be connected with a loan, depending on the conditions."
For instance, if a German engineering company that sells machinery to the US finances the production with a euro loan, but is later paid in dollars, then the company is taking a currency risk. But it could then combine the loan with currency futures, an investment banking product, in order to avoid the currency risk. "Such combinations are very important," Schmidt said.
Jain soon flying solo?
Ackermann's plan was for investment banking and the traditional banking business to each generate half of Deutsche Bank's revenue. So far, the ratio has been 60-40 in favor of investment banking. Whether the goal will remain an even 50-50 when investment banker Jain heads the board is an open question.
Age alone suggests Jain may soon turn the shared leadership into a solo spot - he is 14 years younger than Fitschen, who is not far from retiring age. Former UBS risk manager Wieslaw Jurczenko says Jain will not be able to escape his instinct: "If investment banking makes up such a large share of the earnings of a company, then it also has a corresponding influence on the operational side, and on the strategic side."
Recent personnel decisions suggest that Jain's power in the bank is expanding. The posts of risk manager, chief economist, and IT and human resources director have been filled with Jain allies. Will the European debt crisis give him the opportunity to formulate and pursue a strategy at his own pace? That, too, is an open question at Deutsche Bank.
Author: Michael Braun / sp / sgb
Editor: Ben Knight