Deutsche Bank After Ackermann

Deutsche Bank

After Ackermann

Nov 16th 2011, 13:15 by D.S. | BERLIN

JUST when the succession at Deutsche Bank, Germany’s biggest, seemed settled, the future of its leadership has changed again. And some shareholders are now worried that too much emphasis will be given to investment banking, a business with falling returns.

Josef Ackermann (pictured) will not, as was expected, rise seamlessly from chief executive to chairman next May, Deutsche Bank announced on November 14th. Instead Paul Achleitner, finance director at Allianz insurance, will fill the chairman’s role, whereas Mr Ackermann will leave the bank.

Mr Achleitner has an investment-banking pedigree: he ran the German operation of Goldman Sachs from 1994 until 1999, and at Allianz is best known for spectacular corporate acquisitions and disposals. That disturbs insiders who have been pleased to see Mr Ackermann, himself a former investment banker, sing the virtues of less volatile commercial and retail banking. Results for the last quarter showed growing profits in retail banking thanks to the recently acquired Postbank, whereas corporate and investment banking have languished, with a 75% drop in pre-tax income compared with the previous quarter.

Some shareholders fear that Mr Achleitner will still tend to favour investment banking. He and his supervisory board will oversee the joint chief executives Anshu Jain, who will be running investment banking from London, and Jürgen Fitschen, who will be in charge of the domestic and international business. It will be difficult for an outsider to manage personalities and fiefs as well as Mr Ackermann might have, critics say.

Yet Mr Ackermann’s departure solves a niggling corporate-governance problem. Under German law, a chief executive of a listed company may not become its chairman without a two-year cooling-off period, unless 25% of shareholders endorse the move. Corporate-governance experts say that installing an independent board member next to such a chairman would address the problem.

But doubts were growing whether Mr Ackermann would have won the quorum next May—because of some shareholders’ discomfort with ongoing litigation. Mr Ackermann as well as other present and former bank officers are defendants in the Kirch case. The estate of Leo Kirch, the late media mogul, accuses the bank of plotting and precipitating his corporate bankruptcy in 2002. In early November prosecutors raided the defendants’ offices, including Mr Ackermann’s, looking for evidence of attempts to mislead the court. Deutsche Bank has denied any wrongdoing and its lawyers have put in a counter-claim that the prosecutors and the court have secretly colluded on the case.

Deutsche Bank is also facing litigation in America connected with residential mortgages and in Germany with the misselling of complex financial products to municipalities. Mr Ackermann’s departure may make it easier for the bank to draw a line under these cases.

But the main question remains what course will Deutsche Bank steer between exciting but volatile investment banking, where it is a world leader, and the more boring bits of banking that countries and consumers need? It is arguably Germany’s only successful big bank. It will always need to balance its own interests with those of its host nation. It is not only too big to fail, but too visible to be allowed to screw up.