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Photo Gallery: Deutsche Bank's New Indian CEO

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The New Face of Deutsche Bank Anshu Jain Mixes Success and Controversy

Anshu Jain, the future CEO of Deutsche Bank, represents both the bank's greatest successes and its biggest excesses. In the United States, the German institution is viewed as one of the main culprits behind the financial crisis -- one of the reasons the Indian-born financier must first prove to many at the bank that he is the right choice.
Von Christoph Pauly und Padma Rao

Anshu Jain and his cousin Amit waited three days for a tiger in an Indian national park. Investment banker Jain had traveled all the way from New York to see the animal, but it never made an appearance.

Disappointed, the two men and their wives got back into their car, a rickety Ambassador, and drove out of the park. Suddenly one of the imposing predators crossed the road. The two men grabbed their video cameras and climbed onto the roof of the car.

Anshu Jain was so enthusiastic that he jumped down from the car. He has raved over Jim Corbett, the famed British conservationist who died in 1955, since childhood. He was so excited that he ran after the tiger, still holding his video camera up to one eye. His wife Geetika panicked.

Cousin Amit decided to climb down from the roof, as well. With a loud bang, the roof of the Ambassador snapped back into its original shape, and the tiger bounded away.

Amit Jain has to laugh when he tells this story, which transpired two decades ago, as he sits in his office on the 20th floor of a futuristic glass office building in Delhi. Like many Jains, he has carved out a career for himself and now heads the Indian branch of the Dutch chemical company Akzo Nobel.

His older cousin Anshu has been even more successful. He is expected to become the CEO of Germany's Deutsche Bank in May 2012. Jain and German economist Jürgen Fitschen will take over as co-CEOs, replacing Deutsche Bank's current CEO Josef Ackermann.

Responsible for the Bank's Most Profitable and Controversial Unit

When that happens, the man who loves tigers will become one of Germany's most powerful men. As the head of its investment banking division, he has already been responsible for Deutsche Bank's most profitable -- and controversial  -- businesses, which led the world into a financial crisis and to the brink of ruin.

Friends and relatives describe Jain as a nature-loving and unassuming man, grounded and modest, but also as a highly intelligent, cool-headed analyst. His opponents see him as the epitome of the Anglo-American brand of financial capitalism, for which yields are everything.

Deutsche Bank doesn't just represent Germany because of its name. Whether they wanted to or not, the largest German bank and its top executives have always been held responsible for more than just the latest quarterly earnings. Deutsche Bank has always been more than just a bank, in good times and bad, while its senior executives were consistently seen as more than bankers.

One of Jain's predecessors, Hermann Josef Abs, negotiated a debt agreement with international creditors on behalf of Germany in 1953. Former Deutsche Bank Chairman Alfred Herrhausen was assassinated in 1989, presumably by the German Red Army Faction (RAF) terrorist organization. Herrhausen was one of the symbolic figures of what was then West Germany, a political thinker whose influence extended far beyond the banking world.

Ackermann also has close ties to politics. He advises German Chancellor Angela Merkel and is involved in the preparations for the G-20 summit of the world's most important nations, a role that is taken for granted. But his relationship with the German government is not entirely unclouded, and Ackermann, a Swiss national, was long unpopular with the German public.

Painstaking Preparations

And now there is Jain, an Indian from Delhi, who lives in London and becomes visibly irritated when asked about his German language skills. Nevertheless, he has been secretly learning German since last year, as part of his painstaking preparations for his new job.

In fact, Deutsche Bank has two faces: It is indispensable for Germany, and yet it also outgrew the country long ago. English has been its official language of doing business for more than ten years, and its employees come from 120 countries.

Jain's appointment reflects the reality of an institution that, as a result of massive investments, has become one of the world's largest investment banks. In good years, Jain and his team of fixed traders from all over the world have been responsible for two-thirds of the bank's total profits.

But there have also been bad years. In 2008, Jain's division lost more than €7 billion ($9.6 billion). At the time, it was the stable, seemingly dull bread-and-butter deals with small and mid-sized German companies, and with private customers, that stabilized the bank. Deutsche Bank has this part of its business to thank for allowing it to remain liquid without direct government aid.

But Deutsche Bank profited indirectly from the government support nonetheless. The bank escaped billions in losses when German mortgage lender HRE and American insurance giant AIG were bailed out. If that hadn't happened, the entire financial system could very well have collapsed.

But compared with most of its competitors, Deutsche Bank is still in relatively good shape today, in the midst of the global financial crisis. In recent weeks, its strong roots in Germany have helped to ensure that the institution, unlike many competitors from Italy and Greece, would not have to end each day wondering whether it would still have enough money the next morning.

Multiple Lawsuits in the United States

This doesn't mean that Deutsche Bank's activities in the financial markets are seen as particularly sound. Its share price has plunged by more than 40 percent since early July, partly because the bank faces the threat of being sued for billions in multiple lawsuits in the United States.

Deutsche Bank was one of the major players on the US real estate market before it collapsed in 2007. Jain, who was responsible for the bank's interest-rate products, did his utmost to encourage the development. Between 2005 and 2008, Deutsche Bank issued structured mortgage-backed securities worth a total of $84 billion.

When the housing bubble burst, these securities were no longer worth much, leading many customers to feel deceived by the bank. A few major investors have already filed lawsuits, and others are likely to follow. At the beginning of the month, the US Federal Housing Finance Agency (FHFA) filed a suit against the bank, in which it alleges that it and 16 other banks provided false information about the quality of mortgage-backed securities. Deutsche Bank had sold securities worth $14.2 billion to two semi-governmental mortgage lenders, Fannie Mae and Freddie Mac.

Even the US government is suing Deutsche Bank. In 2007, it acquired mortgage lender MortgageIT, which had gained access to a government program by providing false information on bad loans. The government allegedly incurred a loss of $370 million as a result.

A Serious Mistake

Deutsche Bank stresses that most of the potential wrongdoing occurred before it bought MortgageIT. After long hesitation, Jain had supported the purchase during the late phase of the real estate boom in order to capture even larger market shares in the US market, which still appeared to be booming. Today he sees it as a serious mistake.

The risks stemming from these legal disputes are enormous. Sources in the investment bank say that damages and fines could wipe out a year or two of Deutsche Bank's earnings in the United States. But they also add that this is something the bank could endure.

Nevertheless, enormous damage has been done to Deutsche Bank's image. A US Senate report lists Deutsche Bank, along with Goldman Sachs, as one of the main culprits behind the American real estate crisis.

And now, of all times, Deutsche Bank is being placed in the hands of the top investment banker responsible for all of these deals.

Since Jain started working for Deutsche Bank in 1995, his office has been in a small, transparent glass box next to the large trading room at Deutsche Bank in London. With his office door usually open, Jain can easily hear the shouting of the traders. The coffee room, where machines dispense thin streams of coffee with a small amount of foam on top, is next to Jain's office. This is where Angela Merkel paid him a visit in 2003, before she became chancellor. She wanted to know how the financial markets work and, like most visitors, received a brief, sharp analysis.

Contacts with George Soros and Warren Buffett

Jain never worked as a trader. At Deutsche Bank, he has always handled the large customers, the ones that move billions back and forth around the globe. He was also the one who established contact with hedge fund managers like George Soros. "We weren't even involved in this league until 1995," says one man who has closely followed Jain's rapid ascent.

Today the bank does its best business with speculators like John Paulson, an American who earned $5 billion in profits last year. The major US fund companies, like Capital Group and Blackrock, also prefer to discuss their investment ideas with someone like Jain, who is seen as a brilliant analyst. This benefits Deutsche Bank, because these large customers ultimately issue big orders.

The story that Ajit Jain tells is typical. He too is a cousin of Anshu, as well as the potential successor to Warren Buffett, one of the richest men in the world, at his investment firm Berkshire Hathaway.

"Ten years ago, I arranged a meeting between Anshu and my boss in Omaha," says Ajit. The two men had lunch and spent half a day talking to each other. Later on, Buffett called Ajit and raved about the young banker. "That boy will be running an investment bank one of these days," predicted the old man, an icon in the financial world nicknamed the "Oracle of Omaha."

Anshu Jain had impressed Buffett, who struck it rich with Coca-Cola stock and recently rescued Bank of America from a difficult situation by investing $5 billion in the company, with his detailed knowledge about covered bonds. "When the telephone rings, I hope it's Anshu," Buffett apparently said jokingly.

Contacts like this are priceless for Deutsche Bank, an upstart in the world of investment bank only ten years ago. Jain is probably the main reason the institution has become the world's largest foreign exchange and bond dealer. The investment banking division earned close to €4 billion in profits in first six months of this year alone.

As head of the unit, Jain's compensation, sometimes ranging into the double-digit millions, makes him one of the world's best-paid bankers. He has usually made more money than his boss Ackermann, who is often at the top of the list of Germany's best-paid executives. According to an ironclad rule of investment banking, those who lay golden eggs are showered with money.

Jain, for his part, has spoiled the 16,000 investment bankers working under him, drawing on a bonus pot that has always been stocked with several billion euros. Once, in 2007, he even flew in the Rolling Stones for a private concert in Barcelona.

But Jain would no longer do this sort of thing today. Times have changed. These days he invites his biggest customers and the most important bankers to an annual event at a London hotel. Famous musicians still perform at the event, but their names are protected like a state secret.

The managers who engaged in the notorious real estate deals in the United States were also among the best-paid bankers for years. Jain fired them without hesitation when their deals became a liability for the bank and its customers. But now the bank must pay for the consequences.

A Vegan Jain

"Jain is personally against taking risks," says one of his aides. When he approved gigantic bets on the continued growth of the housing market across the Atlantic, Jain also permitted some of his investment bankers to bet on a collapse of the US real estate market. As a result of this hedging strategy, the subprime mortgage crisis did not affect the bank nearly as much as it did many of its competitors. But now it is precisely these deals that make the bank legally and morally vulnerable.

His friends in India and elsewhere insist that money doesn't mean that much to Jain. He still lives in a relatively modest house in West London with his wife and two children. "When Anshu celebrated his 25th wedding anniversary last March, there were no celebrities invited, just old friends from many countries around the world," says Madhur Singh, a friend of the family.

Jain probably has his parents to thank for his down-to-earth personality. Despite having received the highest grades on the entrance exam for the Indian government service in 1955, his father remained a relatively modestly paid civil servant. His son took a public bus to school, although it was one of the best private schools in New Delhi.

Jain has given his father a BMW with a chauffeur. But the 80-year-old prefers to drive himself to his bridge games. To his family's amusement, he recently bought a Tata Nano, the world's cheapest car.

As a vegan, Jain, a slim, athletic man, eats no animal products. This can give rise to some uncertainty among the Germans with whom he meets. A member of his inner circle characterizes his eating habits as "vegetables and pasta."

His surname identifies him as a Jain. Like his contemporary Buddha, Mahavira, the founder of this ascetic religion, preached nonviolence and set even stricter standards for the treatment of animals. The roughly 4 million Jains in India reject the caste system and attach great importance to education for their children.

Of course, the combination of Jainism and investment banking has prompted many a journalist to conduct avid research. But according to family members, there is no Puja corner, or trusted family shrine, in the Jain home. Jain has apparently not set foot in a temple in at least 10 years, not even during the three-week vacations he spends in India during the Christmas season.

The Jains are not all that different from families in other parts of the world. In many families, religion lives on primarily in the canon of values the parents use to set an example for their children. "Our fathers wanted us to have a good character and live disciplined lives," says cousin Amit, describing the child-rearing principles in the Jain family. Those who broke the rules as teenagers, for example, could expect to be punished.

According to a friend, Jain's wife Geetika, a travel writer and children's book author, is sometimes plagued by a touch of guilt and asks herself and wonders whether she shouldn't have sent her children to a Jain or Sikh temple more often. She is a Sikh and, like her children, eats meat at their London dinner table. Like Jainism, Sikhism also rejects the caste system and other forms of discrimination, but it doesn't emphasize asceticism as much.

After earning a Bachelor's degree at the University of Delhi, Geetika attended graduate school in the United States. Anshu Jain did the same thing, enrolling in the University of Massachusetts at Amherst at 20 and later earning an MBA there.

Can Jain Adjust to Germany?

The family has lived abroad for the last 28 years. The Jains have become British citizens and have made London their second home.

But will Jain settle down in Germany, as well?

He has recently been emphasizing how important Germany is to Deutsche Bank, a lesson he says he learned from the financial crisis. Recently, Jain has been characterizing the bank's German roots as one of its biggest strategic advantages.

To be on the safe side, the supervisory board has appointed  Jürgen Fitschen, the 63-year-old head of the company's Germany business, to be his co-CEO for three years. The idea is that Fitschen can maintain the important relationship with German politicians and the German public. Fitschen is a jovial, outgoing, old-school banker with excellent contacts at all levels of management at Deutsche Bank, as well as with many German CEOs. In principle, he and his team will have a veto when it comes to introducing new products. Not everything a cunning investment banker from London comes up with will be well received in the world of a southern German small-business owner.

"It's a built-in and intentional conflict," says one of Fitsche's confidants. Ideally, he adds, this is the best way to avoid mistakes that could harm the bank's reputation and aggravate customers.

But it also offers plenty of explosive material. The opposing positions sometimes held by the two men have only been softened by the fact that Jain and Fitschen hold each other in high regard. For many years, Fitschen was responsible for the bank's Asian business.

Of course Jain, as the head of the bank's most profitable division, was usually in the stronger position, because Fitsche had no major business deals or even profits to show for himself.

In addition, Jain managed to integrate the important Global Transaction Banking business into his division a little over a year ago. The seemingly mundane transaction business, which the bank handles for companies, provides many important contacts and about €1 billion in profits each year -- profits that do not fluctuate as widely as those of the investment bankers.

A Focus on a Less-Risky Business

As a consequence of the financial crisis, Jain has focused even more heavily on the transactions the bank performs for major customers. This is less risky than the controversial practice of trading for the bank's own account. Besides, for Deutsche Bank, one of the biggest players in the market, it is a highly profitable business.

Deutsche Bank managed to climb up the rankings when many of its competitors were eliminated as a result of the financial crisis. Jain said triumphantly at an analysts conference that the bank had been the beneficiary of consolidation.

For these reasons, it is quite possible that the two partners heading Deutsche Bank will find common ground. If they don't, they will only strengthen Ackermann's future position as chairman of the supervisory board -- an outcome neither man wants.

The man still in charge at Deutsche Bank is convinced that he is better at many things than his successors. The relationship between Ackermann and Jain hasn't been the best, ever since the Swiss banker chose not to favor  his successful investment banker to succeed him, but Axel Weber, the former head of Germany's central bank, the Bundesbank. Weber has since been tapped to become the chairman of Swiss banking giant UBS.

Last week, Ackermann also said some surprisingly critical things about the business Jain has run so successfully until now. "There are growing questions about the efficiency of the financial markets and about whether some modern financial products make sense," he said at a conference sponsored by the German business newspaper Handelsblatt. According to Ackermann, the banking industry should examine its broader activities to determine "whether we are doing justice to our genuine responsibilities as service providers to the real economy."

So much criticism, which has to include some self-critique, isn't to be expected from Jain. His investment bank thrives on the constant up and down of the markets. For Jain, prices in the markets still reflect the collective wisdom of the world's top brains.

It's a still big step to take, going from the self-confident head of an investment bank to "Mr. Deutsche Bank." The supervisory board has given Jain a five-year contract.

Translated from the German by Christopher Sultan
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