Executive Turnover Clouds Deutsche Bank's Wall Street Future

Date : 06/20/2019 @ 6:26AM
Source : Dow Jones News

Executive Turnover Clouds Deutsche Bank's Wall Street Future

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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