The Man Who Tamed the World’s Most Troubled Bank

Christian Sewing barreled down a German autobahn to meet clients in a former milltown when a friend called. Credit traders had zeroed in on Deutsche Bank, the lender Sewing had nursed back to health after he took over five years earlier.

It was March 2023 and markets were looking for the next victim after Credit Suisse and two U.S. regional banks collapsed. The cost to insure Deutsche Bank’s debt surged to its highest level since the pandemic.

Teams in the bank’s twin-tower headquarters in Frankfurt scrambled through 15 drafts of a message to reassure customers that the bank was solid.

Before they could get the statement out, an unexpected clamor started.

“Deutsche is in robust shape,” research firm Autonomous told clients in an email. “We view this as an irrational market,” Citigroup analysts advised. Even the bank’s regulator, the European Central Bank, blamed the commotion on an illiquid corner of the market. Things swiftly stabilized.

Executives trashed the message and decided to let the market speak for itself.

The episode showed Deutsche Bank’s newfound resilience. But the wobble was also a reminder to Sewing that the German behemoth has yet to fully convince markets that it has jettisoned its reputation as a weak link in the global financial system.

It wasn’t long ago that Deutsche Bank was synonymous with banking scandals, money laundering and controversial clients, including former President Donald Trump and convicted sex-offender Jeffrey Epstein. Bankers set up deals for their own advantage that sometimes went against shareholders. The bank had poisoned relations with regulators.

The bank was also known for its big egos and swaggering traders who tried to muscle themselves into the upper echelons of Wall Street. They took huge risks to try to go toe-to-toe with the likes of Goldman Sachs and JPMorgan and sometimes cost shareholders dearly. The bank racked up losses that ran into the billions of dollars on complex market positions.

Sewing has pulled Deutsche Bank to firmer ground. The bank makes more money on routine transactions for companies and less on wild market bets. That has made revenue more stable, which together with cost controls has returned the bank to profit. The lower risk appetite, executives hope, has made it less prone to scandals.

Shareholders have yet to fully reward the bank. Deutsche Bank stock is just 6% above where it traded when Sewing took over. The bank’s price-to-book ratio, a widely watched measure for investors, remains one of the lowest among Europe’s big banks.

Concerns linger about its exposure to U.S. commercial real estate. Germany’s sclerotic economy provides a dreary backdrop.

“What Sewing inherited was such a mess, it will still take time for it to be rebuilt,” said Alexandra Annecke, a portfolio manager at Germany-based Union Investment, an investor in Deutsche Bank.

Sewing, 53 years old, said he has won the early battle to tame the bank’s culture. Once an avid tennis player, he cites Boris Becker who said it is far harder to repeat winning than winning it for the first time.

“My biggest worry now is that people get arrogant again,” Sewing said.

Early Joiner

Sewing started at Deutsche Bank at 19 as an apprentice just before the Berlin Wall fell. He grew through the ranks in less sexy areas such as risk management and corporate banking and didn’t have the swashbuckling personality of an investment banker. He headed the retail and commercial businesses when tapped to be chief executive in 2018.

He came in at a low point. The bank had raised nearly €30 billion, equivalent to $32.34 billion, in capital over an eight-year period to plug holes in its balance sheet created by surprise losses and fines. It was more than the value the market put on the entire bank.

Sewing was a contrast to his predecessors, which included several foreigners who came from risk-taking investment banking who wanted to throw their weight around on Wall Street.

He envisioned a humbler bank less driven by big egos. Sometimes he appears in meetings by surprise, quietly entering the room and leaning against the wall. Angela Merkel, the German chancellor at the time, commented privately to a Deutsche Bank official that she expected Sewing would be more self-confident when she first met him.

Sewing took inspiration from playing the board game Risk with his two sons. The game requires timely offense and defense to compete for territories on a map of the world.

“First thing is always to secure your homeland,” Sewing said of his strategy. “Then, you go after the opportunity.”

Shrinking Wall Street

Sewing shrank Deutsche Bank’s Wall Street footprint and focused on more predictable foreign-exchange transactions, cash management and financing for businesses.

The bank closed its hedge-fund services unit and pulled back on functions such as buying and selling stocks and helping other foreign banks move dollars around the world, a lucrative business that got it in repeated trouble with U.S. money-laundering authorities. Complex assets were hived off and sold.

When the company handed out layoff notices in the bank’s London offices in the summer of 2019, U.K. media splashed a photo of two tailors leaving the building after fitting expensive suits on senior bankers. Sewing was furious and personally chastised the bankers.

Colleagues say Sewing attends local events in Germany and meets midsize company clients, a break from some predecessors who preferred to schmooze with global leaders.

He appointed sober personalities to key roles. He named a compliance executive to run the business in the U.S., where it operates under a tight leash from U.S. regulators and two special monitors put in place after regulatory settlements related to lax money-laundering controls and market manipulation.

He put Fabrizio Campelli, a veteran Deutsche Bank executive who cut his teeth at consulting firm McKinsey, in charge of restructuring. Sewing eventually made him head of the corporate bank and the investment bank, a unit that in the past housed Deutsche Bank’s biggest risk-takers.

The salt-and-pepper-haired Campelli would come into meetings with detailed spreadsheets of 70 initiatives next to names of those responsible and updates. The idea was to cut unneeded costs and risks that consumed too much capital and boost businesses that brought in steady revenue.

The safer approach was validated when Deutsche Bank dodged two bullets that hit Wall Street rivals. It avoided losses from the family office implosion of Archegos Capital Management. And it didn’t get stuck with oversize loans related to M&A deals when credit markets froze in 2022.

Inside the corporate and investment bank, which serves big companies and investors, a chunk of revenue now comes from more stable corporate client activities, the bank said. But executives admit they need to do more to convince investors of the changed mix of business.

“Corporate banking became the heart of the bank,” Campelli said.

Back-Office Deals

Executives point to examples where Deutsche Bank helps with back-office operations more than funding risky bets. It created offerings to clients like automated tax reports and currency conversions for companies with global businesses. It brought in dedicated service teams and relationship managers to help companies with their day-to-day business.

While Deutsche Bank has a large business lending to private-equity firms to make acquisitions, it sees the future in providing those firms low-risk services that don’t require the bank to hold a lot of capital.

One example: Deutsche Bank started to provide cash-management services for a Blackstone investment fund in the U.S. in 2019 and has since expanded to multiple Blackstone funds. “They have really stepped up their game in that area,” said Frank Barbara, who runs global treasury operations at Blackstone.

To be sure, the bank has had its stumbles under Sewing. It has missed cost-cutting targets and has drawn warnings from regulators about still faulty anti-money-laundering controls. Its asset-management arm was embroiled in a greenwashing scandal.

In Spain, regulators and customers have accused Deutsche Bank of selling risky foreign-exchange derivatives to small firms that suffered big losses. The bank said it is reviewing and enhancing relevant processes and controls.

“If we have made mistakes I’m the first one to say this was a mistake,” Sewing said. He points to his quick apology last September when retail customers at its Postbank unit in Germany were locked out of accounts when the bank merged two computer systems.

Analysts and investors say for investors to buy into the Sewing revival story, the bank needs to boost shareholder returns for a longer stretch.

“This is basically a ‘show me’ story,” said Stuart Graham, an analyst from Autonomous. “They need to keep delivering over and over to convince investors.”

Matthew Fine, a portfolio manager at New York-based Third Avenue Management, began investing in Deutsche Bank after Sewing took over. It is now one of his top 10 holdings. He thinks Sewing represents a fundamental break from the bank’s long-sullied past.

“We view him to be one of the most underrated managers of a global financial firm,” Fine said.

Write to Patricia Kowsmann at [email protected]