Executive Turnover Clouds Deutsche Bank's Wall Street Future
June 19 2019 - 06:26PM
Dow Jones News
By Jenny Strasburg
Executive turnover and banker defections are complicating
Deutsche Bank AG's efforts to stabilize its Wall Street
presence.
The German banking giant is discussing naming its fourth U.S.
head in less than four years, according to people close to the
bank. And two senior New York bankers are poised to leave,
threatening a loss of key clients and possibly other staff, in what
would be the most prominent departures from the U.S. operations
this year. This comes as the lender prepares to unveil
investment-bank cuts, which are likely to bring more turmoil.
Deutsche Bank has suffered from years of declining profits, a
plunging share price and repeated restructurings that have upended
top management but failed to steady the lender's performance.
Those challenges are global. Meanwhile, Deutsche Bank's clout in
the U.S. has steadily weakened, fueling a cycle of revenue
declines. The U.S. is the source of mounting legal headaches, too.
Deutsche Bank faces increasing scrutiny through Congressional
subpoenas and government probes, including an ongoing criminal
investigation, into its role in facilitating global money
laundering linked to Russia and other countries. The bank has said
it is cooperating with investigators.
The high-level U.S. personnel drama poses another hurdle. The
bank internally has proposed promoting Christiana Riley, currently
chief financial officer of the investment bank, to replace Deutsche
Bank's current chief executive of the Americas, Tom Patrick, the
people close to the bank say. But the suggestion prompted U.S.
regulators to express concerns about yet another management change
in the key New York-based role at such a tumultuous time, according
to people familiar with discussions inside the bank and with
regulators.
Federal Reserve officials, long frustrated about deficiencies in
Deutsche Bank's technology and controls, have been heartened by the
bank's recent progress and have suggested that some continuity
would serve the bank well, some of the people said.
Ms. Riley and Mr. Patrick declined to comment through a bank
spokeswoman. A Deutsche Bank spokesman said, "We do not comment on
rumors about senior management."
The Americas CEO job is central to Deutsche Bank's next phase: a
slashing of poorly performing businesses in the U.S. and globally.
Merger talks earlier this year with smaller German rival
Commerzbank AG ended with no deal, leaving Deutsche Bank investors
wondering what comes next.
Executives insisted the bank is on the right track, but its
shares have continued to hit new lows. Last month, executives
promised "tough cutbacks" in the investment bank, with details
expected by next month.
The Americas CEO is responsible for day-to-day dealings with
U.S. banking watchdogs. Mr. Patrick, a former trader and head of
the equities business, was named to the role in August 2017.
Global CEO Christian Sewing in recent months has pushed for Mr.
Patrick, who reports to him, to leave, people close to the bank
say. The two have clashed over management style and the pay package
Mr. Patrick negotiated under Mr. Sewing's predecessor, which made
Mr. Patrick one of Deutsche Bank's highest-paid executives last
year, according to people familiar with their interactions and
nonpublic compensation figures.
Mr. Patrick helped steer Deutsche Bank through its U.S.
stress-test submissions to the Fed earlier this year and has
continued meeting with regulators in New York and Washington,
people inside and close to the bank say. But some managers have
complained that Mr. Patrick is often absent from the office, adding
to the speculation that he will leave, according to people inside
the bank.
Earlier this month, the bank's chief operating officer for the
Americas, reporting to Mr. Patrick, left to join another bank.
Deutsche Bank hasn't named a successor.
Mr. Sewing and other executives in recent weeks have made it
clear to regulators that they view Ms. Riley as the best candidate
for the U.S. CEO role, the people familiar with the discussions
say. She is based in Frankfurt but has frequently spent time in New
York, and has an office on an executive floor of the bank's U.S.
headquarters on Wall Street. She has been with the bank since 2006.
Her global responsibilities cut across finance and strategy in the
most complex part of the bank. Her name has been discussed with
Federal Reserve officials but in a preliminary, informal manner,
some of the people say, meaning the bank hasn't officially
requested the Fed's signoff. Bank executives remain confident in
prospects for the appointment, some of the people say.
Deutsche Bank has been on a tight leash with the Fed because of
what the regulator has described privately as a litany of
compliance, accounting and technology deficiencies over many years,
as previously detailed by The Wall Street Journal. The problems
were so bad that in early 2017 the Fed put a "troubled-condition"
label on Deutsche Bank's U.S. operations, the Journal reported last
year, citing people familiar with the matter.
The designation was secret, in keeping with Fed rules, and a
rare rebuke for a global investment bank. It has meant stricter Fed
oversight of hiring and firing decisions, risk-taking and
high-level restructuring decisions. Even without that designation,
Deutsche Bank would typically keep regulators closely apprised of
its plans for the Americas role, people close to the bank say.
Write to Jenny Strasburg at jenny.strasburg@wsj.com
(END) Dow Jones Newswires
June 19, 2019 18:11 ET (22:11 GMT)
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