Deutsche Bank's New CEO, a Risk Veteran, Warns of 'Tough Decisions'

By Jenny Strasburg

Christian Sewing, a career Deutsche Bank AG employee little known outside Germany, learned with near-certainty Friday night that he should prepare to take the global stage running the country's biggest lender.

Now that he's been appointed CEO, his role is clear: to make Deutsche Bank safer and more profitable, in part by shrinking it.

That task has proven fraught with difficulty even for past incumbents who had decades of investment banking experience. Investment banking and trading, Deutsche Bank's biggest sources of profits, are lately struggling.

Mr. Sewing has never worked directly as an investment banker or trader, though he has overseen risk controls and auditing for both businesses in senior roles spanning his 27-year Deutsche Bank career. Since 2015 he has been the senior executive overseeing retail, private and commercial banking out of the Frankfurt-based lender's hometown towers.

The 47-year-old German has increasingly over the past year been viewed as a potential internal candidate to eventually lead the bank. Some investors and analysts felt he could benefit from more preparation and broader experience, especially in investment banking.

But internal turmoil at Deutsche Bank and waning confidence in its strategy, especially with regard to its global trading and capital markets operations, led its supervisory board to act over the weekend. Some of the turmoil stemmed from revelations that Deutsche Bank's chairman, Paul Achleitner, had been searching outside the bank for replacement CEO candidates. The supervisory board felt uncertainty was damaging the bank.

On Friday night, the supervisory board scheduled a weekend call to talk about the fate of CEO John Cryan. After a 2.5-hour discussion, Deutsche Bank's supervisory board late Sunday night tapped Mr. Sewing, ending Mr. Cryan's time in charge with two years still left on his contract.

On Monday morning, Mr. Sewing's first memo to employees as chief executive warned them, "We'll have to take tough decisions and execute them." Of the investment bank, he wrote, it will be "pulling back from those areas where we are not sufficiently profitable."

People who have worked closely with Mr. Sewing say he understands the lender's businesses, from retail and private banking to deal-advisory and fixed-income trading -- enough, at least, to make tough decisions.

Maybe just as importantly, some of those colleagues say, Mr. Sewing is far less divisive than some of his past and present management-board members, including recent CEOs. His low-key style and perceived loyalty to Deutsche Bank -- referred to by some as "true blue," the color of Deutsche Bank's slash-in-a-square logo -- should help offset some of the doubts he'll face taking on the big job. Plus, they say, he arrives with an apparent mandate to make quick decisions, something seen as lacking in recent months, say people close to the bank.

Mr. Sewing already stressed Deutsche Bank's repeated failures to cut expenses as promised, calling cost-cutting targets "nonnegotiable." That won't be popular with bankers and traders looking for big bonuses.

It may be popular among investors. Deutsche Bank's shares rose more than 4% in morning trading Monday, and closed up 1.2% in trading in Frankfurt. They are down about 27% this year.

Investors will want more information, quickly, from Mr. Sewing about what his promotion means to Deutsche Bank's strategy, especially for its investment bank. Some analysts have called for the lender to dramatically slash its U.S. trading operations, arguing the profits don't justify the financial and legal risks involved. Initial reactions were skeptical.

"We struggle to see how replacing Mr. Cryan with Mr. Sewing will result in a change of fortune for the bank," Citigroup Inc. banking analysts wrote Monday morning. They called Mr. Sewing's appointment "underwhelming," citing his lack of hands-on investment-bank experience or time outside of Deutsche Bank.

Mr. Sewing, a married father of four, grew up in Bünde, a town of roughly 45,000 people not far from Düsseldorf in northwest Germany's North Rhine-Westphalia state, in a tobacco-growing region known for its cigars. A longtime Bayern Munich soccer fan and avid tennis player, Mr. Sewing at a young age thought about becoming a sports journalist.

He started at Deutsche Bank, in 1989, as a teenage apprentice, gaining experience in retail and commercial banking in Germany. He went on to advise corporate clients while based in Toronto and held senior credit-risk positions in Tokyo. Mr. Sewing spent six years in London as a credit and risk manager focused part of that time on midcap European companies, and more recently helped oversee audits into some of Deutsche Bank's thorniest legal matters.

Mr. Sewing has told colleagues that he never planned his career, but rather followed the course it naturally took.

That course will steer him now to the U.S., where the Germany-centric banker is now planning a trip, a person close to the bank said. That will help him to become better acquainted with U.S. regulators. Some have been pressing Deutsche Bank to shrink the riskier pieces of its U.S. operations, say the people close to the bank.

Those key U.S. regulatory relationships had been a major focus of Mr. Cryan's time, and he was credited with making strides to improve them.

Write to Jenny Strasburg at jenny.strasburg@wsj.com

(END) Dow Jones Newswires

April 09, 2018 13:14 ET (17:14 GMT)

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