A banker in the spotlight

How will Josef Ackermann fare in leading Deutsche Bank's takeover of Bankers Trust? Robert Cox and Agnese Smith report
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The Independent Online
THE LAST time Deutsche Bank called on Josef Ackermann to manage a group of investment bankers, 130 of them left. That didn't bother the men at Deutsche Bank, as they have put him in charge of the German bank's $10bn (pounds 6bn) takeover of Bankers Trust. Once completed, the transaction, announced last week, will create the world's biggest financial services company, with assets of $834bn.

The exodus of bankers resulted when Ackermann, 50, led an effort earlier this year to combine Deutsche Bank's investment and corporate banking activities. He now faces a task some think impossible. He must integrate Bankers Trust's investment banking business into Deutsche Bank's and generate profits that please shareholders.

"The consensus is that Ackermann is a solid manager, but that this is another ball game," says Leon de Jerez, head of European equities at Standard Life Investments, which manages $99bn and owns Deutsche Bank shares.

Ackermann, who was a Swiss army reserve colonel till 1996, says he can make the acquisition - the biggest foreign takeover of a US bank - pay off.

"I would bet that it takes us not more than two years," he said in a recent interview.

He has already achieved some success with the businesses he runs. The group that lost the bankers will earn DM100m (pounds 35m) this year after losing DM250m in 1997, he said.

And this won't be the first time Ackermann, who is the board member in charge of corporate and investment banking, has worked with Bankers Trust executives. In 1990, while Ackermann was on the board of Credit Suisse Group and responsible for the bank's business with multinational firms, he was in charge of a new group of derivatives traders recruited from Bankers Trust.

He realised that their specialty, derivatives - securities whose value is determined by underlying stocks or bonds - would propel earnings at Wall Street firms, and that Credit Suisse First Boston (CSFB) had no business like it.

"Derivatives were new to the entire group, so nobody wanted to take that job," Ackermann said. "Everyone said we'd lose our heads - they were wrong."

Last year that unit produced $1.167bn in revenue, some 8 per cent of Credit Suisse Group's total revenue. One of that group of bankers, Allen Wheat, went on to become CSFB's chief executive.

Ackermann, a former lecturer in monetary theory at St Gallen University, near Zurich, was groomed to be one of Credit Suisse's top executives, rotating throughout Europe, Asia and the US in businesses ranging from commercial banking and foreign exchange trading to capital markets. In 1984 he became a managing director at CSFB, spending much of his time in London, where he owns a home.

Ackermann "has the typical broad and deep Swiss banking experience, working in all sorts of functions over a 20-year period", says Hans-Joerg Rudloff, a former chief executive of CSFB and now the president of Barclays Capital. This allows him "to see things with a helicopter view".

Some of the changes Ackermann presided over have been criticised. This year's reorganisation led to the defections of top bankers, including a large group led by a technology banker, Frank Quattrone, and defections in Europe, such as Peter Golob, a man who helped arrange Deutsche Bank's underwriting in the initial stock sale of Deutsche Telekom.

Ackermann may become more unpopular when he cuts jobs. The bank has said it plans to fire 5,500 people, or 5.7 per cent of the banks' combined workforce, at both firms. Deutsche Bank aims to cut $1bn from its annual costs, starting in 2001.

Ackermann joined Deutsche Bank after he had a falling-out with the chairman of Credit Suisse, Rainer Gut, in July 1996. He landed his present job in part because of his relationship with Deutsche Bank supervisory board chairman, Hilmar Kopper. They first met on the board of Bayer, the German drugs and chemicals company.

Ackermann is known for gathering opinions before making decisions. In September, at a three-day management retreat that he called at a spa in the hills behind Rome to decide on the future course of the investment banking group, Ackermann listened to each of the bankers give their presentations before drawing his own conclusions, and speaking himself on the final day.

"He's not a ra-ra kind of guy - he tends to make decisions quickly once he gets a lot of different points of view," says Edson Mitchell, head of fixed income and currencies at Deutsche Bank, who attended the retreat.

Ackermann himself says: "Sometimes people think I am too friendly. I'm fairly balanced, but I hate it when people spend too much time to make decisions on things that are a no-brainer."

Investors say Ackermann still faces an uphill struggle if he is to make the Bankers Trust acquisition work.

"It's not impossible, but it's going to be very, very challenging," says Raphael Soifer, a Brown Brothers Harriman analyst in New York.

The task for Ackermann will be to blend the four firms that make up the US bank with those of Deutsche Bank. Bankers Trust includes the recently- acquired former European equities arm of National Westminster Bank; the mergers specialist James D Wolfensohn; and Alex Brown, a Baltimore- based investment bank which it bought last year.

"If there were a clear-cut Bankers Trust culture, it would be hard enough, but there are still remnants of NatWest, Wolfensohn and Alex Brown that need to be melded into one culture," says Mark Hoge, a bank analyst at Credit Suisse.

In the third quarter, Bankers Trust lost $488m, its largest quarterly setback since 1989. The losses came from trading in emerging markets and in loans to hedge funds, businesses it hoped to reduce as it concentrated on investment banking.

For Ackermann, persuading the Deutsche Bank board to buy Bankers Trust may have been the easy part. Having joined Credit Suisse in 1977, two years before it linked up with First Boston, he knows how hard it is for a European bank to succeed on Wall Street. Credit Suisse spent 20 years making its acquisition of First Boston work, including bailing it out.

Ackermann has already picked his lieutenants. He will chair a committee overseeing the integration with the Bankers Trust CEO, Frank Newman, that will include Bankers Trust executives Yves De Ballman, Mayo Shattuck III and Mary Cirillo. The committee will also include Deutsche Bank's heads of global markets and equities, Mitchell and Michael Philipp respectively.

Bloomberg News Copyright: IOS & Bloomberg

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