By Jenny Strasburg
FRANKFURT -- Deutsche Bank AG Chief Executive Christian Sewing
said he is prepared to make "tough cutbacks" at the troubled
lender's investment bank, his strongest public admission yet that
the business needs a dramatic overhaul.
But he asked investors attending the bank's annual meeting on
Thursday to wait for details, pleading for their support 14 months
into his tenure as CEO. Mr. Sewing acknowledged that executives
expected a deluge of criticism about performance and high-profile
compliance failures.
He called the decline in the bank's share price a personal
motivator for him even as shares hit another record low of EUR6.35
in Frankfurt. The share price has declined 41% in the past
year.
Shareholder support for executives including Mr. Sewing declined
from a year ago, when Mr. Sewing was new in the CEO role and
promising faster progress than his predecessor. He received a 75%
approval vote Thursday, from 95% last year.
Mr. Sewing said the bank's management is prepared to make deep
cuts at the investment bank, which last year contributed 52% of the
bank's revenue. He said the bank would focus on profitable and
growing businesses but didn't say where cuts are aimed.
Analysts and investors have demanded clues about what comes next
after Deutsche Bank last month called off merger talks with rival
Commerzbank AG. Some investors have called for the bank's
money-losing equities business to be dramatically scaled back if
not closed, for example. The business lost about EUR750 million
($837 million) last year globally, The Wall Street Journal has
reported.
Mr. Sewing didn't discuss that or other struggling businesses,
instead focusing on the positives. Executives are still hammering
out an investment-bank restructuring they hope to unveil before the
end of summer, a person close to the bank said.
Investors have expressed doubts about the current strategy but
are wary of a costly overhaul that could trigger another dilutive
capital increase.
"We can't quite see where money is made or where money is burned
in the bank," a representative of shareholder Union Investment told
bank executives Thursday during public remarks at the meeting. She
criticized executives for shying away from detailed discussions
with investors about strategy failures and plans for fixing
them.
Other investors said they have been patient while continuing to
lose money.
Investment-banking chief Garth Ritchie faced especially harsh
criticism for declining performance contrasted with his EUR8.6
million in pay last year, more than any other management-board
member including the CEO.
Mr. Sewing highlighted growth plans for the transaction bank, a
historically important unit for Deutsche Bank that finances
companies' global trade flows and handles cash for corporations and
governments. Mr. Sewing said the bank has "frequently paid too
little attention" to those businesses.
Executives have discussed breaking the transaction bank away
from the rest of the investment bank to highlight its stronger
profit margins, according to people familiar with the matter. The
unit's newly installed German executive is poised to gain more
power.
"Under Stefan Hoops's leadership, the transaction bank will be
given the freedom and the resources to fully exploit its
potential," Mr. Sewing said, pointing to its business in Asia as a
region primed for growth.
The bank also "has big plans" for DWS, its asset-management
business, Mr. Sewing said, which it wants to make a top-10 global
asset manager. The ambitious growth target would require the almost
doubling of DWS's assets and most likely some kind of merger or
joint venture to achieve that goal. DWS has held talks with UBS
Group AG and others about combining asset-management businesses,
The Wall Street Journal and other outlets have reported, but no
deal has emerged.
Mr. Sewing suggested Deutsche Bank would still consider a merger
deal involving DWS, saying its growth targets are "within reach if
we continue to grow organically and if we remain open to other
strategic options as and when they present themselves." The bank
last year floated about 20% of DWS in a public share offering.
"DWS is part of our plan to boost profitability at the group
level," Mr. Sewing said.
Mr. Sewing said the bank's reputation and businesses have
suffered from repeated investigations and compliance issues. "We
must further strengthen our controls," he said.
Chairman Paul Achleitner, who faced a shareholder challenge to
his leadership, opened the meeting saying the lender is on the
right track despite a year "fraught with setbacks," including new
regulatory investigations and share declines.
Mr. Achleitner solidly survived a shareholder challenge to
remove him from the board, with 90% of votes cast against the
proposal. In a separate vote, he received 71.6% approval for his
2018 performance as chairman, compared with 84.4% last year.
Three executives also soundly survived no-confidence votes
against them by shareholders. Two of those executives Mr. Ritchie
and regulatory chief Sylvie Matherat -- faced the biggest risks due
to investor ire over declining profits and rising compliance
issues. For both, 82% of voting shareholders rejected the
no-confidence proposals.
The same two executives received a more-dismal 61% approval for
their 2018 performance, compared with roughly 75% approval for the
other senior executives.
Mr. Achleitner told investors in a crowded auditorium that the
decision not to merge with Commerzbank was the right one because
the deal's risks outweighed its potential benefits.
He also said he didn't feel political pressure to pursue the
talks, and the decision to begin and end discussions were the
management board's.
Without a merger, Deutsche Bank would have to grow organically,
Mr. Achleitner said.
Mr. Sewing said the potential Commerzbank merger was an
opportunity the bank had to consider. Deutsche Bank now needs a
"clear focus" and must adjust its business divisions while
remaining global, with a strong presence in the U.S. and Asia, he
said.
Write to Jenny Strasburg at jenny.strasburg@wsj.com
(END) Dow Jones Newswires
May 23, 2019 15:17 ET (19:17 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.