Paul Achleitner Uncertainty at the Top

The chairman of Deutsche Bank's supervisory board, a pillar of Germany Inc., is coming under pressure ahead of a May shareholders' meeting as Germany's largest bank founders. On Wednesday, a Qatari shareholder threw him its support.
Paul Achleitner's leadership at the helm of Deutsche Bank is coming under fire ahead of the bank's May shareholders' meeting.

 

It was only a brief statement, but the words must have seemed like manna from heaven for Deutsche Bank and its embattled chairman, Paul Achleitner.

A Qatari investment firm that owns a stake in Deutsche Bank on Wednesday made an unusual, unsolicited public statement of support on behalf of Mr. Achleitner, who is under fire for the mess engulfing Germany's largest bank.

Paramount Services Holdings, which owns a 3-percent stake, said it continued to support Mr. Achleitner, whose term atop the bank's non-executive supervisory board is up for renewal in 2017. The statement rejected an earlier media report suggesting Qatar’s support for Mr. Achleitner was waning.

Paramount is one of two Qatari investment vehicles that together hold 6.1 percent in Deutsche Bank, making Qatar the bank’s second-largest shareholder after Blackrock, the world’s largest investment fund. Deutsche Bank itself would not comment on the show of support.

Deutsche Bank’s shares rose as much as 1.72 percent to €15.63 by 10:50am in Frankfurt trading, helping Germany’s blue-chip DAX Index climb above the 10,000 mark, though the bank pared some of those gains by midday. The bank's shares have lost half their value over the past year as it ploughs through record losses, legal challenges, and plans to cut thousands of jobs and to sell operations globally.

With the show of support from the Qataris, the battle lines have been drawn ahead of Deutsche Bank’s annual shareholders meeting in May. Despite the bank's troubles, Qatar’s public statement might be just enough to help Mr. Achleitner keep his job beyond 2017, analysts said.

"Mr. Achleitner is a survival artist," said Dieter Hein, an analyst at Fairesearch near Frankfurt, who believes that the bank's shareholders should have put more pressure on the supervisory board a long time ago.

Paramount Services Holdings does not believe it would be in shareholders' interests for supervisory board chairman Paul Achleitner to relinquish his position in 2017. Paramount Services Holdings, Investment vehicle of Qatar

Other shareholders have been quietly considering whether to take a stand, according to financial sources, angry that Deutsche Bank has failed to turn around its flagging business and embarked on a much-needed restructuring and change of course much later than its competitors. None, however, have gone publicly on record opposing the embattled chairman.

“In our view, it’s not a question of whether Deutsche Bank needs a new supervisory board chairman; it’s a question of when,” one major shareholder, who declined to be named, told Handelsblatt in February.

Ingo Speich, fund manager at Union Investment, which owns shares of Deutsche Bank, suggested the next 12 months would be critical to Mr. Achleitner’s future, though he too declined to say whether or not he would call for Mr. Achleitner's ouster.

“The share price development is very disappointing. The capital markets need clear signals in the next twelve months about whether the new strategy of Deutsche Bank will succeed,” Mr. Speich told Handelsblatt. "The supervisory board has carried this strategy and therefore also carries responsibility for it.”

 

A Record Loss for Deutsche Bank-updated feb 1 2016

 

Mr. Achleitner, a 59-year old Austrian, is a pillar of German rectitude and one of its highest-profile executives. The former head of Goldman Sachs in Germany and former chief financial officer at German insurer Allianz, Mr. Achleitner has chaired Deutsche Bank’s top control panel, which hires and fires the chief executive and sets major policy, since May 2012.

Together with his wife, Ann-Kristin Achleitner, the power couple have wielded influence over dozens of top German companies in the past decade. In addition to Deutsche Bank, Mr. Achleitner also serves on the supervisory boards of BASF and Daimler. At Goldman Sachs since 1989, he rose to head the U..S. investment bank's German operations in 1994 and was credited with helping banks and insurers negotiate one of the biggest restructurings of the country's financial sector since World War II.

Ms. Achleitner, a Munich finance professor, sits on the boards of Linde, a gas maker, retail group Metro and Munich Re, the world's largest reinsurer. Together, the Achleitners were dubbed "maybe the most influential couple in German business" by the weekly WirtshaftsWoche in 2012.

Hopes were high for a turnaround at Deutsche Bank when Mr. Achleitner took over. Under his leadership, the bank put in place the co-chief executive team of Anshu Jain and Jürgen Fitschen. At the time, the leadership duo represented a new face for the bank. Mr. Achleinter and his new executive team promised a change of culture after the heady days of excess under former chief executive Josef Ackermann, and set about implementing a new strategy designed to return the bank to profit.

For investors, the trouble is that their strategy failed to bring the bank back to consistent profit after the global financial crisis. Instead, the bank appeared to founder under mounting legal problems, many of them caused by criminal activity from employees in Deutsche Bank's investment banking operations in the run-up to the global crisis. Some of those questionable legal dealings, such as allegations of money laundering in Russia, continued into 2015.

A shareholder revolt last year pressured Mr. Achleitner to replace the team with John Cryan, a former UBS banker from Britain with an even tougher reputation as a turnaround artist. Mr. Achleitner's appointment of Mr. Cryan in July was widely praised by investors, but the mood shifted again somewhat in the months that followed. A turn-around plan for the bank, announced by Mr. Cryan in October of last year, has been met with skepticism by some analysts as too timid to solve the bank's woes.

Mr. Cryan will become Deutsche Bank's sole chief executive when Mr. Fitschen steps down on May 19, under a deal worked out last year with the departure of Mr. Jain. The question, for some, is why Mr. Achleitner should get to stay on while the people he chose to run the bank have left.

Germany’s largest bank and one of Europe’s biggest investment banks in January shocked shareholders with a record 2015 loss of €6.8 billion, the largest in Deutsche Bank’s 146-year history as it struggled under a mountain of legal costs and write-downs of failed business ventures.

118 - 2015 Neu 22 02 16-01

 

For many investors, the frustration with Mr. Achleitner lies in the fact that he stayed true to Deutsche Bank's embattled leadership duo of Mr. Jain and Mr. Fitschen for too long. Mr. Jain resigned after an unprecedented vote of no confidence by shareholders last May – an embarassing result that Mr. Achleitner may have been able to prevent had he acted sooner, some say.

“Mr. Achleitner is part of the problem, not the solution,” Mr. Hein of Fairesearch told Handelsblatt Global Edition. “Mr. Jain had to go. Mr. Fitschen will go at this year’s annual meeting. It follows that Mr. Achleitner should go as well.”

Now, Mr. Achleitner’s own future is expected to be one of the main topics at the bank’s upcoming shareholder meeting in May.

“We need to talk about a new beginning on the control board,” said one shareholder, who also declined to be named.

The unsolicited press statement from Paramount released to news agencies today seemed to acknowledge the controversy swirling around Deutsche Bank's chairman.

"Contrary to reports, Paramount Services Holdings does not believe it would be in shareholders' interests for supervisory board chairman Paul Achleitner to relinquish his position in 2017, after his current term expires," Paramount said in the statement, cited by news agencies Reuters and Bloomberg.

Two weeks ago, Germany's Manager Magazin quoted an unnamed person close to the Qatari family of Sheikh Hamad Bin Jassim Bin Jaber al-Thani, who owns a 6.1 percent stake in Deutsche Bank through vehicles including Paramount, as saying Mr. Achleitner would not be at the bank beyond 2017.

Paramount described the recent media "speculation" about its stake in the company as "inaccurate and unrepresentative of its views about the bank and its leadership."

 

Kevin O’Brien is Handelsblatt Global Edition’s editor in chief. Gilbert Kreijger covers companies and markets and Christopher Cermak covers the financial sector for Handelsblatt Global Edition. Michael Maisch of Handelsblatt also contributed to this story. To contact the authors: [email protected], [email protected] and [email protected]