Did Christian Sewing lose all the wrong MDs at Deutsche Bank?

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It's nearly seven months since Christian Sewing took over from John Cryan as CEO of Deutsche Bank. Depending upon who you listen to, his tenure is either going swimmingly or he is floundering about in the deep end.

Sewing's advocates point to the former retail banker's apparent popularity among employees in the corporate and investment bank (CIB). A town hall in Asia this week is said to have gone brilliantly, with attendees praising Sewing's vigour. "It was the best town hall in 20 years," says one DB insider. "Everyone knows there's work to do here and he's got the dynamism to get it done." To his fans, Sewing's expletive-ridden outburst on an internal call was a sign of his mettle ("people were clapping and cheering him"). He is the right man for the right moment.

To his detractors, however, Sewing is out of his depth. There are complaints that Deutsche Bank has lost many of its best producers, and that too many of those who remain are expensive also-rans who won't bring in the growth Deutsche now needs to outrun its 95% third quarter cost ratio.

"Some of the best people on the platform have gone since Sewing became CEO," says a vice president in the London equities division. "He has no real understanding of the business."  It's a complaint echoed by senior people in the investment banking division. "A lot of the top producers have gone," says one. "But most of the top managers are still here. The people who most needed to go have somehow convinced Sewing that they are indispensable. They are all long time Deutsche Bank employees. They know where the bodies are buried and they all look after each other."

Deutsche Bank declined to comment for this article, but the griping reflects the tough task that Sewing - an outsider in the investment bank - faces in his attempt to squeeze costs below €23bn. Between the first and third quarters of 2018, Deutsche Bank cut front office headcount in its investment bank by 1,047 people, a net figure that masks the addition of graduate trainees during the same period. 25% of equities headcount has gone, entire investment banking teams have been removed, and the head of the corporate finance business for EMEA has left for his home in the country. But there have also been numerous voluntary exits as Deutsche Bankers like (most recently) Conor Hennebry have decided to try their luck elsewhere.

As Sewing has set about deciding where and whom to cut, gripers suggest he's been too reliant on an executive team close to his own comfort zone. Sewing's COO, Frank Kuhnke, also has a background in Deutsche's retail arm. Meanwhile, the recent promotion of Stefan Hoops, a former co-head of Institutional & Treasury Coverage and ex-global markets professional as head of global transaction banking, is perceived by some as Sewing's willingness to elevate his favourites. The Financial Times describes 38 year-old Hoops as a "close confidant" of Sewing. "He's been promoted extremely fast for someone so young," complains one Deutsche MD. "Someone has clearly marked him for the top."

Those casting aspersions on the appropriateness of Sewing's cuts will not have long to wait for vindication. In last week's conference call, Sewing repeatedly said that Deutsche is now going for growth in its investment bank. Surviving staff have a license to chase revenues. If they're successful, it should become apparent in the coming quarters.

For the moment, the head of the investment bank, Garth Ritchie, insists that Deutsche is doing fine, despite the bank reporting its worst third quarter revenues in eight years. There may be some truth in this to the extent that Deutsche's large credit business now ranks 1st globally according to Coalition, up from second globally at the end of the 2017, and that Deutsche's sales and trading revenues were only down 7% quarter-on-quarter in the three months to September, compared to - say - a decline of 13% at Goldman Sachs.  It's not exactly growth, but it might be an increase in market share.

And if the growth doesn't happen as planned? Sewing may need to look again at some of Deutsche's remaining managing directors. One investment banking headhunter, speaking off the record, says the German bank is still very top-heavy: "They carry more senior people than almost any other platform. A lot of people there could go and it would make no difference."

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