By Eyk Henning
FRANKFURT-- Deutsche Bank AG's Co-Chief Executive Anshu Jain
survived a contentious shareholder vote at the bank's annual
general meeting Thursday but his time to turn around the bank could
be shrinking.
Mr. Jain and fellow executives drew support from only 61% of
shareholders present at the AGM, the lowest level for an executive
at Deutsche Bank in recent history amid costly scandals and a weak
share price.
In Germany, the approval of the management's actions is
nonbinding. But such significant disapproval is a slap in the face
for Mr. Jain and fellow board members and might prompt Chairman
Paul Achleitner and the bank's supervisory board to critically
evaluate senior executives in the near future.
At the AGM, several large shareholders and investor associations
questioned Mr. Jain's ability to restore Deutsche Bank's
profitability and reputation after a series of litigation issues,
saying they wouldn't vote in approval of management's actions over
the past year later Thursday.
The bank's supervisory board late Wednesday agreed on a
management shuffle in which Mr. Jain takes on responsibility for
the bank's strategy and implementation of a EUR3.5 billion ($3.88
billion) cost-saving program--a focal point of recent criticism.
While the move elevates Mr. Jain's role, it also puts the
India-born U.K. citizen under more pressure to deliver the promised
savings.
"The fact that you want to take care of implementing the
strategy yourself now, Mr. Jain, is an overdue step," said fund
manager Ingo Speich from Union Investment, adding "the time of
excuses [for missing targets] is over. You need to deliver
now."
Hans-Christoph Hirt of the U.K.'s Hermès fund said he welcomed
the most recent changes to the bank's management board but stressed
that "more changes" to the management board are necessary because
he doesn't believe members can deliver promised targets.
In April Deutsche Bank announced the cornerstones of a new
strategy to boost profitability and its share price, both of which
have lagged behind those of major rivals and sparked shareholder
anger. Some investors were disappointed by a lack of detail on the
cost savings and began to urge Mr. Achleitner to reassess his top
personnel to turn the bank around. Mr. Achleitner told The Wall
Street Journal in an interview last week that he was sensitive to
what shareholders think, but stopped short of unconditionally
supporting his top executives.
To avoid becoming the latest in a string of European bank CEOs
ousted in recent months, Mr. Jain must now show he can quickly
deliver promised results. Mr. Achleitner told the Journal that it
will be crucial for management to successfully implement the new
strategy.
Mr. Achleitner put his management team in the hot seat Thursday
by allowing shareholders to vote on the actions of individual
executives, rather than just voting on the entire management team's
performance. The bank also allowed such a vote last year, which is
unusual in Germany. All management board members recorded an
approval rate of around 61%, down from around 89% last year,
reflecting shareholders rising discontent.
Mr. Jain admitted Thursday that he was dissatisfied with cost
savings delivered so far and pledged to make that a top priority in
the coming years. He also acknowledged that "resolving legacy
litigation matters has taken longer, and been very costly...be
assured: we are doing everything we can to resolve the outstanding
issues."
The bank shelled out around EUR8.7 billion in fines over the
past three years according to Union Investment's Mr. Speich, and
some investors argue that Mr. Jain should step down also because he
was head of the investment bank at that time, which bore the bulk
of Deutsche Bank's legal woes. "Mr. Jain, are you the solution to
the problem or part of it?" asked Hans-Martin Buhlmann from the
shareholder association VIP.
Deutsche Bank paid a record $2.5 billion fine to settle U.K. and
U.S. investigations into the manipulation of the London interbank
offered rates, or Libor. As part of the Libor settlement with the
U.K., Britain's Financial Conduct Authority criticized Deutsche
Bank for "repeatedly misleading us."
Deutsche Bank in reaction late Wednesday announced the departure
of two senior executives who were linked to the Libor scandal. Alan
Cloete, a close ally of Mr. Jain and until now co-head of the Asia
Pacific region, and Colin Grassie, head of the U.K. business, will
soon leave. Mr. Cloete oversaw the bank's Libor submissions at the
time of the attempted manipulation.
Even though it became clear in recent weeks that the management
would face hefty criticism at the AGM, Mr. Jain said last week he
was confident that a majority of shareholders would back him.
Madeleine Nissen
in Frankfurt contributed to this article.
Write to Eyk Henning at eyk.henning@wsj.com
Corrections & Amplifications
Hans-Christoph Hirt's name was misspelled in a previous version
of this article.
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