Sewing Says Deutsche Bank Must Regain `Hunger for Business'

(Bloomberg) -- Deutsche Bank AG’s new Chief Executive Officer Christian Sewing said the lender needs to be faster at making decisions and clear out unnecessary bureaucracy as he set out his first goals as head of Germany’s largest lender.

"Our start to the year was solid but ‘solid’ cannot be our ambition," Sewing said in a letter to staff published Monday. "With regard to our revenues we have to regain our hunger for business."

Sewing Says Deutsche Bank Must Regain `Hunger for Business'

The 47-year-old lifelong Deutsche Bank employee was appointed late on Sunday to take over from embattled CEO John Cryan as part of a broad reorganization to restore revenue growth. The decision ended a dramatic couple of weeks of turmoil at Europe’s largest investment bank as Cryan fought for his position and Chairman Paul Achleitner quietly approached potential replacements. Sewing’s ascent marks the return of a German national as sole CEO for the first time in 16 years.

At first glance, Sewing seems chosen to complete the task that Cryan began but failed to complete quickly enough -- that of shrinking Deutsche’s investment bank and making a coherent whole out of its domestic retail and commercial operations. Sewing announced in his memo on Monday plans to “further adapt our revenue, cost and capital structure” in the investment bank.

“We’ll thoroughly analyze how we want to position this pillar of our bank in a difficult market environment,” he said. “The priority is to leverage our strengths and to allocate our investments accordingly. And at the same time we will look to free up capacity for growth by pulling back from those areas where we are not sufficiently profitable.”

Deutsche Bank’s shares gained as much as 4.7 percent to 11.88 euros and were up 4 percent as of 10:56 a.m. in Frankfurt. The stock has declined 26 percent this year, valuing the German lender at 24.4 billion euros ($30 billion).

“Mr. Sewing as new CEO is a sensible solution,” Ingo Speich, a fund manager with Union Investment, said in an email. “Deutsche Bank should now use the chance to once again reassess its strategy. Especially in investment banking, we see a need for adjustment.”

Sticking Point

The supervisory board on Sunday wasn’t unanimous in adopting some of the measures proposed by Achleitner, according to people with knowledge of the meeting. One sticking point was the proposed leadership change at the investment bank, one person said.

As part of the overhaul, Garth Ritchie will lead the investment bank -- which remains at the core of the bank’s problems -- and take over as co-deputy CEO with Chief Administrative Officer Karl von Rohr.

Ritchie said in a memo to employees on Monday that “no near-term changes are expected to CIB management,” adding that the bank now needs to “focus on the job at hand -- which is to regain our position as the preferred provider to our clients.”

Sewing said the bank’s adjusted costs must not exceed 23 billion euros in 2018, calling the matter “non-negotiable.”. Missing cost and revenue targets was damaging for the bank and the new leadership won’t accept missing more, he said, adding that setbacks seen in the fourth quarter are not to be repeated under any circumstances.

"In our view, should Christian Sewing want to make an immediate impact, he should reinstate the old cost target of 22 billion euros – illustrating commitment to focusing on shareholder value,” Kian Abouhossein a London-based JPMorgan Chase & Co. analyst, said in a note to clients.

The bank had warned last month in its 2017 annual report that it may not realize the expected cost savings from merging its two domestic retail units until next year.

“The challenge ahead is a big one for all of us,” Sewing said in the note. “We all know and sense how fast our industry is changing. The time pressure is on and the expectations are high from all sides – our clients, our investors, the regulators, politicians and the media.”

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