Deutsche Bank shareholders set to pressure chairman
Deutsche Bank's chairman faces sharp criticism at the bank's annual general meeting on Thursday, as shareholders consider launching an investigation into management's response to scandals that have cost it billions of euros in fines.
The meeting will give investors, infuriated by shrinking profits and a dramatic fall in the bank's stock price, an opportunity to challenge Paul Achleitner's actions since he took over as chairman in 2012.
Shareholder advisory groups ISS and Glass Lewis have recommended investors back a shareholder motion for a probe into whether fines for wrongdoing were higher at Deutsche because management obstructed or misled investigators.
Last year, the United Kingdom's Financial Conduct Authority fined Deutsche for the manipulation of lending benchmarks Libor and Euribor, saying it had increased the penalty because the bank had 'repeatedly' misled it.
The meeting also comes weeks after the sudden resignation of a non-executive director at Deutsche, Georg Thoma, who was investigating earlier scandals but left after coming under public fire from fellow directors for being overzealous.
"I want to know what substance these allegations have," said Klaus Nieding from retail investor association DSW.
One large investor, who spoke on condition of anonymity, said that although shareholders were unlikely to demand the chairman go immediately, it was possible that Achleitner could leave later this year.
"Achleitner will likely prevail at this year's AGM, but I would not be surprised if he is replaced some time later this year," the investor said.
"He's a good organizer, very consensus-oriented. But the bank has been in a permanent crisis mode for a long time and needs someone who puts his foot down," he said, adding that Achleitner was seen as a member of the old guard and responsible for the bank's current condition.
A second investor said that while the supervisory board's choices had often been unsatisfactory, sudden change could backfire.
"If we kill the supervisory board now, that would further destabilize the bank," he said. "That would be a step backwards."
However Deutsche's second largest investor, the Qatari royal family, has recently backed Achleitner.
In a magazine interview last month, Achleitner himself said that no large shareholder had demanded he step down, adding that he would run for another term if there were an election this year.
Deutsche bank declined to comment ahead of Thursday's AGM.
One of Deutsche's biggest problems is litigation following a series of scandals. The bill for fines and lawsuits since 2012 has already hit €12.6bn. Deutsche paid more than $3bn in fines alone for manipulation of interbank rates such as Libor.
Its chief executive, John Cryan, who took on that role less than one year ago, has embarked on an overhaul, replacing top management, fast-tracking the settlement of legal action and cutting costs.
"We are giving Cryan the benefit of the doubt," said a large investor.
Shareholders will be asked to approve executives' and supervisory board members' performance. Although a standard item at German shareholder meetings that does not require a response from management, a low approval rate can trigger change.