Deutsche Bank Investment Bank Head Ritchie Leaves in Revamp
Garth Ritchie, global head of the investment bank at Deutsche Bank AG, arrives at the bank’s annual general meeting in Frankfurt, Germany. (Photographer: Alex Kraus/Bloomberg)

Deutsche Bank Investment Bank Head Ritchie Leaves in Revamp

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(Bloomberg) -- Deutsche Bank AG investment bank head Garth Ritchie is leaving, marking the first official casualty of an overhaul that’s shaping up to be the largest in the lender’s recent history.

Ritchie will depart at the end of the month “by mutual agreement,” the bank said in a statement on Friday. Chief Executive Officer Christian Sewing will take over responsibility for the division and further changes to the investment bank’s leadership will “follow in due course,” the bank said in the release.

The executive will continue to advise on Brexit, for which he has been earning a special allowance of 250,000 euros ($280,000) a month, the bank said without indicating whether he will continue to be paid the same. His severance will be in line with the typical amount paid to German management board members of about two years’ salary, according to a person with knowledge of the matter. In Ritchie’s case, that equals about 11.2 million euros.

Deutsche Bank Investment Bank Head Ritchie Leaves in Revamp

Sewing is poised to present a sweeping overhaul, probably after a supervisory board meeting scheduled for Sunday. The restructuring plan will be focused on deep cuts to the investment bank, which has long underperformed rivals, and changes to the lender’s leadership, people familiar with the matter have said.

Deutsche Bank shares rose on the news and were up 3. 7% at 7.26 euros as of 4:18 p.m. in Frankfurt. The lender was the top performer on the benchmark Stoxx 600 Index.

Ritchie, 51, has been the target of criticism for some time. He and Sylvie Matherat, the chief regulatory officer, received the lowest approval vote at Deutsche Bank’s annual general meeting and rumors about her departure as well have been circulating. Ritchie was also named as one of many suspects in an investigation by German prosecutors into alleged tax fraud.

“We thank Garth Ritchie for his dedication and the remarkable contribution he has made to the bank over his long career,” Chairman Paul Achleitner said in a statement on Friday. “He helped Deutsche Bank to weather an extremely challenging period and we wish him all the best for the future.”

Rising Star

Ritchie joined Deutsche Bank in 1996 in Johannesburg and subsequently rose up the ranks. He was promoted last year to deputy co-CEO and sole head of the investment banking division, which contributes roughly half to the bank’s overall top line despite criticism of the unit’s performance during his tenure.

“This is the best step in terms of the desired structural change at the bank,” Andreas Meyer, a portfolio manager at Aramea Asset Management AG, said by phone. “The move keeps the hope alive that the door open to the bitterly needed transformation of the bank.”

The South African has gained more and more power since 2005, helping to shape the investment bank even as it began sinking under legal probes, mounting costs and poor performance. He came close to leaving the bank last year and wound up being promoted instead. Investors have criticized Ritchie’s generous paycheck for last year, a period when shares fell by more than half.

While the investment unit has undeniably become a major headache for Deutsche Bank, observers disagree about how much of the failure was directly his fault. Some of the revenue decline was the result of decisions to stop offering products such as securitized trading, and elevated funding costs at Deutsche Bank coupled with challenges across the banking industry exacerbated the situation.

Many of Ritchie’s colleagues described him as a straight-talking and pragmatic manager willing to help out on pitches to clients. Under his leadership, the investment bank cut its balance sheet, reduced costs, stabilized senior management ranks and fixed many control issues, several people said.

Control Issues

Critics say he thrived in an environment of favoritism and was slow to address control issues. Ritchie helped oversee Deutsche Bank’s Russian equities business during the years when regulators say employees in Moscow helped spirit more than $10 billion out of the country through stock transactions known as mirror trades.

Sewing promoted the silver-haired executive to deputy CEO and made him sole head of the investment bank, placing him in charge of a division that accounts for about half of the firm’s revenue. A few months later, his contract was renewed for five years, even though several investors made it clear they were unhappy with the appointment, according to people briefed on their views.

Although all European investment banks have struggled with low interest rates and competition from U.S. rivals, Ritchie’s decisions have taken their toll. He hung on to Deutsche Bank’s troubled U.S. operations and the equities-trading business, even as the latter saw revenue decline for 15 straight quarters. The business lost about $750 million last year, people familiar with the matter have said. Many analysts and investors have long urged the bank to make deeper cuts in those areas.

©2019 Bloomberg L.P.

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