He is one of the world’s best-known bankers, a survivor of the financial crisis and even a criminal trial: Josef Ackermann, chief executive of Deutsche Bank, is an undisputed figurehead of global finance. But as he draws towards the end of a remarkable career, is Mr Ackermann in danger of tarnishing his legacy by muddying the search for a successor?
This week an adviser to a group of pension funds highlighted growing concern among investors at the bank’s failure to present a plan to replace Mr Ackermann, Deutsche’s chief executive since 2002. “The process and ... public discussion which has been ongoing for the last few years are harming not only to potential candidates but particularly to the company,” said Hermes Equity Ownership Services.
The letter and criticism was directed at Deutsche’s supervisory board, which will formally choose a successor. But no one assumes Mr Ackermann is standing back from the task – indeed Clemens Börsig, supervisory board chairman, said this week his chief executive remained “fully involved” in the selection process.
Within Deutsche, some believe this week’s investor criticism is a “tipping point” that means the bank needs to address the issue more quickly. Deutsche has already botched the issue once: in 2009 Mr Ackermann extended his contract for three more years in the absence of a clear succession plan.
Klaus Nieding of the DSW, an organisation representing German private investors, also this week urged the bank “to be open in communication ... and put an end to the speculation”.
Who runs Deutsche, and how effectively, is of immense importance for Germany, where the bank is by some way the biggest and most influential in the eurozone’s largest economy. It also matters internationally, with Deutsche’s global investment banking operations and €1,800bn ($2,600bn) balance sheet making it a shoo-in for a forthcoming list of “systemically relevant” institutions.
Theoretically there is no hurry to conclude the search. Deutsche is performing well, targeting a record €10bn of operating pre-tax profits this year, while Mr Ackermann has a contract to 2013. The 63-year-old does not want to be a lame duck and many at the bank advocate a short handover, recalling a long, painful transition between Mr Ackermann and his predecessor, Rolf Breuer.
A school of thought is that Mr Ackermann will depart a year early if the bank achieves this year’s profit target. “Even if this is the case, it is surely too soon to expect an announcement 12 months in advance,” says Matthew Clark, an analyst at Keefe, Bruyette & Woods.
Another banks analyst says shareholders “are not as bothered as they should be” about the succession, anguishing more over worries such as the eurozone sovereign crisis.
Operationally, Deutsche is performing well. Its investment bank, led by Anshu Jain, is in a better position than many rivals, keeping up profits while curbing risk. Deutsche is also rebalancing towards lower-risk retail banking, notably with the acquisition of local rival Postbank, whose vast deposit base will help Deutsche achieve new regulatory standards.
“The right personality can learn anything. Personality one cannot learn,” he told Germany’s Die Welt newspaper last month.
However, the bank has some troubling legacies – commercial and legal – of the boom years, even owning a casino in Las Vegas as a consequence of one loan gone sour. In recent months the bank’s conduct in the US housing market has brought it on to a collision course with legislators and lawyers: the bank has found itself excoriated by a Senate committee and facing a civil fraud suit from the Justice Department, while the city of Los Angeles has called the bank a “slumlord” for its management of repossessed homes.
The bank denies these accusations and criticisms, but some investors have been left wondering whether Deutsche has been excessively aggressive in its business practices, accident-prone, or the victim of regulators overeager to go after foreign banks.
The legacies of the financial crisis may also be shaping Deutsche’s thinking on the kind of leader it needs. The drama of the crisis, when Mr Ackermann and German politicians thrashed out bail-outs of domestic rivals, has given way to a tussle over regulation and a battle over eurozone debt. Mr Ackermann seems to believe that the bank’s connections and ability to shape debate are more important then ever.
Such a comment reinforces the view that Mr Ackermann is keen to find a top role for Axel Weber, the former head of the Bundesbank – who has never run a commercial bank but is well networked in global finance.
However, another argument in the debate over the next chief executive is that Deutsche should not neglect what puts it into a position of power: its ability to generate profits.
Deutsche’s expansion over two decades has taken it beyond Germany into a world of “Anglo-Saxon” finance and is propelling it more deeply into the growing markets of Asia. What better way to reinforce that message, goes one argument, than to appoint as chief executive Mr Jain – Indian-born, English-speaking and someone involved daily with the bank’s most sophisticated businesses? Conversely, what message would it send about corporate Germany to say that the bank should only be led by a native German speaker?
Jon Peace, an analyst at Nomura, says: “A dual CEO structure where Jain takes care of internal management and someone like Axel Weber takes care of external relations could make a lot of sense.”
In Berlin, the bank’s succession planning has been under scrutiny for some time. Chancellor Angela Merkel’s officials report signs from Deutsche pointing to the Weber-Jain combination. Officials are said to have no preference, but warn that Mr Weber’s appointment could raise eyebrows. “At the Bundesbank, Weber was regulator of Deutsche Bank – and all its German rivals,” says one official. “I can’t see that, say, Commerzbank would be terribly pleased given the insights he’s had.”
In 2009 Mr Ackermann himself warned of the risk of reputational damage as a reason to squash succession speculation and stay. But that postponed, rather than diffused, tensions. As the DSW’s Mr Nieding put it, Mr Weber is well networked; Mr Jain knows how to make healthy profits for the bank; and Hugo Bänziger, chief risk officer, knows hows to make sure it survives. “If we could bake the next candidate he would have something of all those properties,” says Mr Nieding. But Deutsche has no bakers, only bankers – and needs to choose one to lead it soon.