April 3, 2018 / 4:25 PM / a year ago

Two major investors criticize Deutsche Bank chairman over CEO search

ZURICH/FRANKFURT (Reuters) - Two major Deutsche Bank (DBKGn.DE) investors on Tuesday criticized Chairman Paul Achleitner over the bank’s performance and his handling of a search for a new chief executive.

FILE PHOTO: Deutsche Bank supervisory board chairman Paul Achleitner gives a speech during the Swiss International Finance Forum in Bern, Switzerland June 20, 2017. REUTERS/Arnd Wiegmann/File Photo

Last week, Reuters and other news organizations reported that Achleitner had begun a search for a new CEO to replace John Cryan. Cryan has said he will stay on in a memo to staff, but Achleitner has so far remained silent.

At the heart of the debate over the bank’s leadership is the future of the investment bank.

Confidence in Achleitner has been damaged, said a major shareholder. “He makes too many excuses for strategic mistakes that fall under his responsibility,” the person said on condition of anonymity.

Another major investor said: “The situation is a bit odd. Achleitner is obviously not controlling the process. All is a bit chaotic at the moment.”

Both Cryan and Achleitner have been criticized for Deutsche Bank’s share price and earnings. But Achleitner, rather than Cryan, should take the blame, said the second shareholder, who also declined to be named.

A spokesman for Deutsche Bank declined to comment on Achleitner or Cryan’s behalf.

A third major investor, also speaking anonymously, came to Achleitner’s defence. Asked about sentiment turning against Achleitner, the investor said: “No, this is spin”.

The bank’s largest investors are Qatar’s royal family, Chinese conglomerate HNA, U.S. asset manager BlackRock and private equity fund Cerberus. Together they own about a third of Germany’s largest bank, which employs more than 97,000 people.

In a March 28 message to staff made public by the bank, Cryan – whose term ends in 2020 - sought to quell talk of an imminent exit and of disagreements between him and Achleitner, saying he was “absolutely committed” to serving the bank.

Much of the shareholder discontent focuses on the lack of clear progress at the bank, which has reported three consecutive years of losses under Cryan. Its shares have lost 30 percent of their value since the beginning of the year.

Cryan has slimmed down Deutsche’s investment bank but it has failed to return to growth. Revenues are 25 percent lower than they were in 2015 and a string of top bankers have left.

“It looks like there is some dispute or discussion at the board level about what is going to be the future of the investment bank,” said a fourth person with direct knowledge of the thinking of one of the bank’s biggest investors.

“It is the question of more investment in the platform or more divestment from the platform,” the person said, saying this was a “crucial question to resolve.”

Cryan is conducting a global review of the investment bank which could result in further job cuts or investment.

Supporters of Cryan, which include some shareholders, credit him with settling a string of legal disputes from Deutsche Bank’s reckless expansion during the financial crisis, strengthening its balance sheet and pulling off the listing of the bank’s asset management arm.

But Cryan himself has said turning the bank around will require time. Last month, it reported a bigger 2017 loss than previously disclosed, warned it would miss a cost-cutting target this year, and said a strong euro coupled with higher funding costs would weigh on its first quarter results.

“There has been a steady flow of negative news on Deutsche Bank, but if you look at it closely, they’ve been making progress,” Peter Nerby, an analyst at credit rating agency Moody’s, said.

Additional reporting by Andreas Framke; Editing by Edward Taylor, David Holmes and Jane Merriman

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