Deutsche Bank named Anshu Jain and Juergen Fitschen as future co-chiefs as it seeks to bridge a divide of deep mistrust between Germany and international investment bankers.
Jain, the 48-year-old Indian-born head of Deutsche Bank's investment bank, will share power with Fitschen, the 62-year-old native German responsible for business in Europe's largest economy, the bank said on Monday.
Jain could eventually become standalone chief executive as the lender said his contract will be extended by five years until March 31, 2017, while Fitschen's contract will expire almost two years before that.
Fears that Deutsche Bank could neglect its German roots and expand risk-taking activities prompted key members of the supervisory board to opt for the dual CEO model, adding Fitschen's contact book in Germany to Jain's ability to deliver profits.
The leadership duo will take over when current CEO Josef Ackermann retires in May 2012, though the Swiss banker will remain at the bank and influence senior board appointments in a new role on the supervisory board, the lender said.
The bank is working towards Ackermann being elected to the supervisory board to replace Chairman Clemens Boersig, who will retire in May 2012, the lender said.
For Ackermann to take the helm at the supervisory board without a two-year abstention, at least 25% of shareholders need to vote in favour.
"The Supervisory Board has taken all decisions unanimously and in close cooperation with Dr. Ackermann throughout the process. They provide for both renewal and continuity," said Boersig, who was in charge of the succession process.
The appointments, which were decided at a meeting of the Frankfurt-based bank's 20-member supervisory board, also serve to crimp the influence of Jain.
Jain landed the top job because Deutsche Bank was keen to retain the head of a department that has consistently accounted for 70-85% of group profit and frequently outperformed peers in challenging market conditions.
"I'm humbled and honoured at having been asked to lead this great institution together with Juergen," Jain said in a statement.
Deutsche Bank has sought to establish a "second pillar" by expanding more stable but less lucrative businesses such as retail banking and wealth management as it seeks to pare back the investment bank's share of profits to 60% by 2013.
The bank also said on Monday that the contract of retail banking chief Rainer Neske would be extended until 2017.
The push for a more conservative strategy at the 141-year-old lender reflects widespread suspicion of investment banking, and offers a glimpse into tensions that have dogged Deutsche Bank for the best part of 20 years.
Under Ackermann's leadership, Deutsche Bank cut its dependence on Germany to less than 25% of profit from about 70% when he took over in 2002.
He also focused on shareholder returns and investment banking, shifting Deutsche Bank's centre of power to London and New York, a move that drew fire from German managers and politicians used to Deutsche Bank looking out for Germany.
Despite frequent clashes with Berlin, Ackermann has managed to establish himself as an accomplished international negotiator given his academic background and his role as chairman of the bank lobby group the Institute for International Finance.
Ackermann played a key role in rallying private sector support for a rescue deal for Greece.
Jain has struggled to build a network in Germany, since this was traditionally the stomping ground of either Fitschen or Ackermann.
Since joining Deutsche Bank more than 15 years ago, he has never spoken a word of German at shareholder meetings or public banking events, which has helped foster the impression that he has no interest in German corporate and political dealings.
Jain has played a high-profile role as mediator between business and politics as a member of the Indian Prime Minister's working group on inward investment, and as a member of Deutsche Bank's team advising the UK Treasury on financial stability.
But this has done little to reassure German politicans, who have struggled to find common ground with market players on ways to contain the euro zone crisis.
A glimpse into the level of distrust toward investment bankers was offered by former German chancellor Helmut Schmidt, who earlier this month railed against Deutsche Bank in a piece published in German weekly newspaper Die Zeit.
"Deutsche Bank is no longer German," Schmidt lamented. Today the understanding that Deutsche will look out for German interests no longer holds true he said, adding that investment bankers had caused the last crisis and were at it again.
Schmidt said he, like other chancellors before him, had been able rely on the chief executive of Deutsche Bank -- rather than their own finance ministers -- to represent Germany's interests at international conferences such as G6 meetings.
Jain has tried to placate politicians by emphasising a more conservative approach in investment banking, and by acknowledging the financial sector's role in the financial crisis. Deutsche Bank itself did not require a bailout.
"Virtually every investment bank drifted away from its core mission and took on too much leverage and risk, ultimately proving unable to either measure or manage that risk," Jain told an audience in Frankfurt last year.
Deutsche Bank has radically cut risk by shutting down proprietary trading but the investment banking arm in particular has clashed with regulators around the world and faces a raft of lawsuits.
A glimpse of the scale of the bets traders at Deutsche Bank were running emerged in a US Senate Subcommittee report on Wall Street and the financial crisis published in April.
The bank, at the time worth around 47 billion euros (USD 68.37 billion) in market value, used its own funds to make investments in mortgage-related securities that had a notional value of USD 128 billion in 2007, and a market value of more than USD 25 billion, the report said.
It is the appetite for large bets like these that fuel ex-Chancellor Schmidt's distrust of investment bankers.
"I divide humankind into three categories. Firstly, normal people. We may have stolen an apple in our youth, but in the end we turned into decent guys. The second category are those with a criminal trait. They belong in court, and if found guilty, in jail," he said, adding "the third category are investment bankers and fund managers."
