Who Is Mad (or Rich) Enough to Want to Run Deutsche Bank?

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(Bloomberg Gadfly) -- CEO wanted: Must be independently wealthy, connected to Germany, able to take unpopular decisions in the face of politicians, regulators, unions and shareholders, and be uninterested in ambitious growth or an ego-boosting merger. Any takers?

Deutsche Bank AG's search for a replacement for John Cryan, who fulfills all of these criteria yet hasn't been able to fix Germany's No. 1 bank, looks increasingly like a farce.

The candidates approached -- from former JPMorgan Chase & Co. executive Matt Zames to Richard Gnodde, head of Goldman Sachs Group Inc.’s international operations -- certainly have the right Wall Street pedigree. But it's the job that's the problem: It's a poisoned chalice.

Usually, the idea of turning around a storied European investment-bank would be a tempting one. Wall Street executives frustrated at seemingly immovable bosses like Jamie Dimon or Lloyd Blankfein would normally willingly parachute into a partly-overhauled rival and ride the inevitable upturn.

But fixing Deutsche Bank seems like such a hard and ultimately thankless job that even a banker like Zames -- who seems to want more autonomy -- would surely have pause to think twice. All the more so given the financial rewards: Cryan hasn't taken a bonus in three years.

Where are the easy wins? Deutsche Bank has already raised about $9 billion from shareholders under Cryan and the sale of a chunk of its asset-management unit is generating $2 billion more. Yet even with a stronger balance sheet, the lender is losing market share and failing to earn an acceptable return in global investment banking or in its fragmented domestic market. 2018 has started poorly, with the firm's quarterly market share in international bond underwriting hitting the lowest on record.

More shrinking and cost cuts are needed -- not exactly a CEO's dream -- and any reining in of compensation will probably lead to more defections.

Deutsche still employs almost 100,000 people around the world, making it the sixth-biggest employer among European banks, yet its market value has crumbled to $30 billion, not far off France's Natixis SA, which employs about 20,000 people.

Worse still, the lack of a reliable earner like Barclays Plc's U.K. consumer bank or Credit Suisse Group AG's wealth-management arm means there's no way to counterbalance to a sickly investment-banking arm.

Running Deutsche Bank is ultimately a political job with a lot of reputational risk if anything goes wrong. A German solution like a merger with Commerzbank AG offers one way out -- but it's hard to see how it could ever be presented as a merger of equals given the job losses that would probably be required. With Deutsche shares trading at a steeper discount to book value than Commerzbank, who exactly would end up being in charge? Budding CEOs-in-waiting will likely be bearing this in mind.

If anything, the messy CEO search itself risks dissuading candidates from raising their hands. Long-serving Chairman Paul Achleitner seems willing to turf out Cryan after three years -- despite bearing responsibility himself for some of Deutsche Bank's travails. He has apparently little idea of who the right person should be. Persuading someone to take on the job of running Deutsche Bank is likely to require a promise that a new chairman and overhauled board will be next.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Lionel Laurent is a Bloomberg Gadfly columnist covering finance and markets. He previously worked at Reuters and Forbes.

©2018 Bloomberg L.P.

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