Anshu Jain and Jurgen Fitschen, co-CEOs of German financial powerhouse Deutsche Bank, have decided to step down from their roles before the expiry of their terms. The decision, which was announced during the weekend, comes less than two months after Deutsche Bank was fined a record $2.5 billion by American and British regulators over alleged role in fixing Libor (London Interbank Offered Rate) between 2010and 2003.
Although no serving or past member of the German bank’s board was charged with wrongdoing, critics of co-CEOs have been baying for their blood for no visible change in management culture of the bank, a task they were expected to see through when they were named joint chief in July 2011. Their terms were to expire in March 31, 2017.
Jain, the 52-year-old Rajasthan-born banker, whose rise to the top was seen an exception given that he comes from a non-German speaking background in the conservative management corridors of top German or for that matter European corporations, was earlier the hotshot investment banking head of the bank. Investment banking unit generated bulk of the operating profits for the bank.
He will step down on June 30, 2015, and the board has asked him to remain as a consultant with Deutsche Bank from July 1, 2015, to January 2016.
The board has also asked 66-year-old Fitschen to remain in his current role until the conclusion of the Annual General Meeting on May 19, 2016, to help ensure a smooth transition.
Deutsche Bank’s board named John Cryan (54) as the new co-CEO, effective July 1, 2015. Cryan has been a member of Deutsche Bank’s board since 2013, and has served as chairman of the audit committee and a member of the risk committee. Upon becoming co-CEO, he will step down from the board.
Upon Fitschen’s departure on May 19, 2016, Cryan will become sole CEO.
Cryan was president for Europe at Singapore government’s investment arm Temasek from 2012 to 2014. Previously, he was CFO of UBS from 2008 to 2011 and worked in corporate finance and client advisory roles at UBS and SG Warburg since 1987. He is a graduate of the University of Cambridge.
Talking about the departure of Jain and Fitschen, Paul Achleitner, chairman of the board of Deutsche Bank, said: “Their decision to step down early demonstrates impressively their attitude of putting the bank’s interests ahead of their own.”
Achleitner continued: “Over the course of two decades, Anshu has been instrumental in founding, and then growing, many of Deutsche Bank’s leading businesses. Without his efforts, our bank today would not have achieved or sustained its global leadership. Anshu has earned a place in our bank’s history as an executive who helped to transform Deutsche Bank into the global leader, rooted in Germany, that it is today.”
Anshu Jain said: “In our time as the bank’s leaders, we have boosted capital, reduced exposures and risk and invested significantly in technology, control and compliance capabilities. Most significantly, we have kept our clients happy and our revenues growing while reshaping and strengthening the bank.”
Would Jain make his next halt at India?
Jain has a reasonably long active business-cum-professional life ahead and his move from the German bank has now sparked an anticipation that he would be more closely involved with India.
He has not indicated his next moves yet but the question is whether he would follow the footsteps of Vikram Pandit, former CEO of Citigroup to get closely aligned with the financial services sector in the world’s fastest growing major economy.
In May 2013, ace dealmaker Nimesh Kampani’s JM Financial had announced its association with Pandit. This was part of the plan to seek an entry into banking business. Although, JM Financial did not get a licence from RBI, it is now taking forward the partnership with Pandit through the NBFC route.
The deal involved expanding the lending operations of JM Financial and raising capital for the non-banking finance company of the group, as well as setting up a distressed asset fund.
In the first leg of the transaction, Pandit, along with former Old Lane Hedge Fund partner Hari Aiyar (former chairman and CEO of Old Lane India), invested in JM Financial through the issue of warrants on a preferential basis. Pandit has already converted the warrants into equity and owns just under 1.5 per cent.
The deal also included plans to expand the lending and financing business of JM Financial by raising $100 million from a pool of capital raised by Pandit. The two had also shared plan to form a distressed asset fund with the initial target capitalisation of $100 million.
Last November, a fund managed by Pandit and Aiyar picked an effective 50 per cent stake in the real estate lending arm of JM Financial for Rs 525 crore ($85 million). In a parallel transaction Aiyar’s wife has put in Rs 14.77 crore ($2.5 million).
Even as experts differ on whether India has already overtaken China as the world’s fastest growing major economy due to change in the way GDP is calculated in the country, it is now well acknowledged that it would do so in the current year.
With financial services being the backbone of the economy, acceleration in growth from here on would open up new opportunities in the financial sector.
However, investment banking, Jain’s area of specialisation, is too small a space currently in India. Indeed, the Indian central bank also stopped well short of opening the banking sector in India with licences on tap, trying to do a Pandit with another Indian business house is also a distant possibility.
That wouldn’t prove to be a constraint for Jain, however, if he chose to enter the bustling NBFC space in the country. He could also end up creating a new independent investment banking firm with global operations.
Rajasthan-born Jain completed his bachelor’s in economic from SRCC in Delhi before going ahead to earn an MBA in finance from University of Massachusetts Amherst and spent three years as a derivatives research analyst at Kidder, Peabody & Co (later came under UBS). He then joined Merrill Lynch in 1988 to start a hedge fund coverage group.
He had joined Deutsche Bank in 1995 from Merrill Lynch and became co-chief of the investment bank unit at an age of just 37 after his predecessor Edson Mitchell died in a plane crash.
An avid wildlife photographer, who once held 10 per cent stake in Mumbai Indians, a team in Indian T20 club cricket tournament Indian Premier League, Jain has been associated with Mukesh Ambani-led conglomerate Reliance Industries. Reliance Industries owns Mumbai Indians team.
His sale of this stake to Reliance Industries at par investment value at a big discount to the then market value had come under the scanner.
Interestingly, Reliance Industries has been keen on building its presence in the financial services space and had formed a JV with DE Shaw and also started an early funding platform GenNext Ventures LLP. It is yet to make a big splash in the sector, though.
Jain has previously also served in a working group advising former Indian Prime Minister Manmohan Singh for attracting foreign investment.