In the nearly eight years Paul Achleitner has been chairman, Deutsche Bank AG has lost around 75% of its market value, changed three CEOs and undertaken several restructurings to little avail.
It is, then, perhaps not surprising that key shareholders, including members of the Qatari royal family and U.S. private equity fund Cerberus Capital Management LP, are calling for his dismissal before his contract expires in 2022.
Under Achleitner, Deutsche Bank has accrued losses of more than €10 billion. Battling slumping revenues, especially in its investment bank, it struggled to keep costs down as regulatory fines and restructuring charges piled up.
As CEOs and other senior executives came and went, the chairman managed to keep his position. But investor anger has been growing, especially after the sacking of CEO John Cryan in early 2018. Achleitner's approval rating by bank shareholders has slumped as he faced two investor votes to be removed from office at annual general meetings in 2018 and 2019.
The chairman has already said he will not seek another term and has begun looking for a suitable successor. But for some shareholders that is not enough as they continue to lose money. Deutsche's share price was €6.49 at close Dec. 10, down from €29.08 on May 31, 2012, when Achleitner was appointed.
Challenges to execution
The bank's weakened position in Europe and globally has made it extremely vulnerable to any market stress, be it because of Deutsche's own issues or economic and geopolitical turmoil.
Execution risks for its latest restructuring plan, launched in early July, is high and the general market and economic environment are less than supportive. It aims to complete the revamp by 2022 and hit an 8% return on tangible equity while cutting its adjusted costs to €17 billion. Cost reduction is going well at the group, which has also slated a major cut in full-time staff by around 18,000 positions to some 74,000 by 2022.
The ROTE target, however, is seen as almost unattainable for Deutsche given the gloomy markets and economic outlook for the near term.
At the bank's investor day Dec. 10, current CEO Christian Sewing affirmed the 8% ROTE target but said it now looks more ambitious than it did in July given worsened macro conditions.
The ECB's decision earlier this year to maintain negative interest rates for longer makes it hard for Deutsche to grow revenue; it said it would especially affect returns at the private bank and corporate bank. A slowdown in its home market of Germany is another headwind.
At the same time, dynamics in the global investment banking revenue pool are changing with European banks giving up market share to their healthier and more profitable U.S. peers.
Dropping approval rating
Some shareholders pushed for Achleitner's replacement as early as 2016 ahead of the ensuing AGM in May 2017 where he was due for re-election. Thanks to his role in attracting China's HNA Investment Group Co. Ltd. as a new major shareholder, his approval rating at the 2017 AGM was above 90% and his contract was extended for another five years.
But soon after that he again faced strong shareholder criticism after deciding to replace Cryan. Although he survived the votes for a premature dismissal, Achleitner's approval rating slumped to 71.63% at the AGM in 2019 from 98.57% at his original appointment as chairman in 2012.
In the years 2014 and 2015, shareholders did not vote on the actions of Achleitner specifically but instead on the actions of the supervisory board as a whole.