A golden jubilee; Deutsche again; and fruity news
This is my 50th Abigail with attitude column.
To celebrate, I want to return to where I started and look at Deutsche Bank. In the past year, the bank has done well. Its share price has risen by some 25% although Goldman’s stock has soared by 50%. Josef Ackermann, Deutsche’s chief executive, has had a good year too. He is now finally free of the insidious manacles of the Mannesmann litigation. Last November, all charges against him were dropped. However, Jo, whom one source describes wryly as a “patrician European” has other worries. The bank’s profits are unevenly balanced: the investment bank contributes a colossal 75% to the bottom line. Results in retail banking and money management look anaemic.
Anshu Jain, co-head of Deutsche’s corporate and investment bank, is impressively intelligent. A peer at a rival investment bank told me: “He’s probably the brightest CEO on the street and he won’t let you forget it.” Another mole said: “Anshu’s running a money-machine.” Deutsche’s first-quarter 2007 results support Mole’s view: record revenues were achieved in Jain’s global markets area.
However Anshu is a legend in another sphere. I’m talking physique not intellect. Whenever Jain's name is mentioned, women gasp and ask: “Is he as good-looking in the flesh as in photographs?” Well, ladies, people who have met him say the answer is yes. Please don’t all storm his office at once. If the rumours are true, might it be an inappropriate suggestion that Anshu consider starring in a short biopic to keep his adoring fans happy? I am thinking of something along the lines of the iconic Diet Coke advertisement where women rush to the window to ogle a bare-chested, six-packed hunk.
Anyway, back to boring finance. Ackermann is admired for having increased Deutsche’s return on equity from 4% to 41% since 2002. However, Ackermann is merely the chairman of a holding company. He is reliant on his boys to run the businesses. And thus he must have the right people beneath him. I hear good things about Rainer Neske, who heads the private and business clients’ area.
Deutsche’s asset management and private wealth management businesses are not performing. Look at the numbers – the corporate and investment bank run by Michael Cohrs and Anshu Jain achieved a first quarter pre-tax income of €2.4 billion. Whereas the asset and wealth management area, run by Kevin Parker and Pierre de Weck, contributed a mere €188 million to pre-tax income, and that was down 19% on the first quarter of 2006. Compare this with first-quarter results from UBS’s wealth management and global asset management divisions and you don’t know whether to laugh or cry.
Suave Jo needs to get a grip of his underperforming underlings. That shouldn’t be difficult: “Ackermann’s not as laid-back as he looks,” a former colleague warned. Rumours that Deutsche might buy Julius Baer, a Swiss wealth management group, are interesting. However, who would head Deutsche’s enlarged wealth management operations so as to ensure successful integration? Are Parker and de Weck up to the challenge? What do you think?
The other question on everyone’s lips is who will succeed Ackermann when he retires in 2010? To bring in an outsider would be suicidal. It has to be either Cohrs or Jain. Some mutter about Jurgen Fitschen, global head of regional management, as a pretender to the throne. My sources disagree: insisting that Fitschen is not charismatic and, more important, has no product responsibility.
I sense that Jain is primus inter pares. A mole chortled: “Cohrs hasn’t been spotted in the office for seven months. He loves fishing. In fact, he lives to fish.” I am not sure whether this was a reference to creatures with scales or to advisory mandates. Deutsche’s advisory revenues reached a record €251 million last quarter and it is advising Barclays on its high-profile bid for ABN Amro.
The problem for Jain is that he doesn’t speak German fluently and, in the end, that’s what Deutsche is all about – being German. I myself see this as a small technical hitch. Jain is bright and he could easily master the language. I am reliably informed that at the last Credit Suisse annual meeting, the new American chief executive, Brady Dougan, spoke for 10 minutes in German, three minutes in French and then sat down. The canary in the coalmine is: does Jain want to be the next chief executive of Deutsche Bank? He would certainly earn much more running his own hedge fund: think of Vikram Pandit, formerly of Morgan Stanley, now at Citi with a short stint in between at Old Lane.
By the way, did you see the disappointing first-quarter profits from alternative investment manager Fortress Investment Group? The company’s debut on the New York Stock Exchange in February was a complete feeding frenzy. Fortress’s founders – Wes Edens, Bob Kauffman and Randy Nardone – pranced down Fifth Avenue saluting the crowd. I jest – but the three hedgehogs do seem to have become a subdivision of the Royal Family –or at least Wall Street’s royal family. Unfortunately, the first profits that Fortress announced as a public company were mixed. Net income more than halved to $62 million as compensation and benefit expenses surged. However, assets under management rose by 70% to $36 billion (as at March 31 2007), so let’s hope last quarter was an aberration.
And finally, what is the erroneous gossip Parisian insiders are whispering about: the nugget that French newspapers can’t discuss because of privacy laws? Hot hint: it concerns a journalist, the president of the Republic, and another, smaller person. Hotter hint: it’s not true.
Next week: are the Swiss boring? Please send news and views to firstname.lastname@example.org.
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