THE supervisory board at Deutsche Bank, Germany’s biggest lender, has been sounding out replacements for its chief executive for weeks. On April 8th it made its choice: Christian Sewing, an experienced insider. He starts with immediate effect, replacing John Cryan, who became joint chief executive in 2015 and sole boss a year later. It is the latest in a series of quick changes for the bank.
Mr Sewing is the first German in 16 years to serve as Deutsche’s sole boss. He is also the first in many years without a career in investment banking. In his 25 years at the bank he has worked in commercial banking, auditing and risk management, most recently as joint head of the retail division, which he successfully slimmed down. The appointment is seen by many as heralding a shift in favour of retail banking, especially since Marcus Schenck, joint head of investment banking, is also leaving after being rebuffed in his efforts to expand his division.
Yet the circumstances surrounding Mr Sewing’s elevation suggest confusion as much as calculation. The moves were not “a turn away from investment banking”, insisted Paul Achleitner, the chairman of Deutsche’s supervisory board, to Frankfurter Allgemeine Zeitung, a daily newspaper. Other mooted candidates, such as Mr Schenck, Jean-Pierre Mustier of UniCredit and Christian Meissner of Bank of America, are experienced investment bankers. Mr Achleitner comes out looking muddled. At least one investor has called openly for his departure. Others have questioned his judgment.
Deutsche’s investment-banking arm has struggled against big American competitors. Analysts at Scope Ratings, a ratings agency, reckon the only way forward for that division is “drastic” cuts. But returning to its roots in retail banking in its home market is not appealing, either. It is tricky to make money in a land of 1,600 banks where retail clients are reluctant to borrow, especially with interest rates so low. The structural unprofitability of German retail means investment banking has been “all there was” to Deutsche, says Dan Davies of Frontline Analysts. He thinks the bank needs to concentrate on investment banking, not retail, in Europe, and scale back in America. Such very different recommendations suggest that neither path offers an obvious way forward.
If anyone can pull off a turn towards retail, it should be Mr Sewing. If, on the other hand, Deutsche opts to double down on investment banking, he may end up looking vulnerable. Deutsche has had four CEOs in six years (see chart). Mr Sewing must wonder if his rise is a blessing or a stitch-up.