Top Deutsche Bank Investors Focusing 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 at what’s shaping up to be one of the most tense gatherings of the season. The biggest shareholder advisory firms are recommending to vote against last year’s actions by the supervisory and management boards -- a rejection that would amount to an embarrassing vote of no confidence but wouldn’t force leaders to step down.

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 and hovered near a record low Tuesday, after revenue contracted for nine straight quarters and Chief Executive Officer Christian Sewing cut the outlook for 2019.

Senior European Central Bank officials have also suggested that Achleitner’s exit would be in the lender’s best interests, 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 Deutsche Bank, they said.

As the euro area’s main banking supervisor, the ECB is charged with ensuring that lenders are run safely and rarely intervenes in the case of individual executives or members of the board. In relation to Achleitner’s tenure, an ECB spokeswoman said “we have no view on this matter.”

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.

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 explored a merger with Commerzbank 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.

Deutsche Bank swung between gains and losses, declining 0.3% at 10:37 a.m. in Frankfurt trading.

‘Not Fun’

Deutsche Bank’s upcoming shareholder meeting on Thursday, and one at Commerzbank on Wednesday, follow investor revolts at several large European companies. Shareholders in Bayer AG rebuked the drugmaker’s chief executive officer over the $63 billion acquisition of Monsanto and the handling of legal challenges linked to the deal. ING Groep NV and UBS Group AG also saw investors withholding support.

BlackRock Inc., Deutsche Bank’s largest single shareholder, has mandated a specialized company to vote in its stead on Thursday.

“These meetings are not going to be fun for the boards or the management undoubtedly,” Philipp Hildebrand, vice chairman of BlackRock, said in an interview Monday. The two German lenders must find “an answer to the business model problem which has been at the core of European banking.”

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. At least one large shareholder said they’re unhappy with Ritchie’s leadership.

Deutsche Bank is unlikely to make any major strategic announcements at the shareholder meeting, though may guide when it plans to give the next update, one person said. Sewing is currently examining unprofitable investment banking business lines such as equities trading and parts of the U.S. operations, people familiar with the matter have said. He’s also looking to give more visibility to a unit that provides cash management and trade finance to companies, and accelerating planned savings in the retail business, they said.

--With assistance from Mohammed Aly Sergie and Sarah Syed.

To contact the reporters on this story: Eyk Henning in Frankfurt at ehenning1@bloomberg.net;Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net;Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel

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