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 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.
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 15:40 ET (19:40 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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