Deutsche Bank bets on Jain to deliver on investor demands

FRANKFURT (Reuters) - Deutsche Bank has beefed up the powers of co-chief executive Anshu Jain and reduced the influence of his partner Juergen Fitschen in a management shake-up aimed at improving performance and mollifying shareholders.

The changes, revealed late on Wednesday, make Indian-born Jain accountable for Deutsche Bank's reorganisation and drive to cut an additional 4.7 billion euros in costs.

Fitschen cedes control of the bank's division that contains assets to be run down or sold off, while Deutsche's retail banking boss, a senior executive in Asia and the head of the UK business are all to leave the bank.

Germany's biggest bank made the changes ahead of its annual shareholder meeting on Thursday, where shareholders have demanded clarity over its future direction and efforts to improve profitability.

The bank has trailed rivals under the tenure of Jain and Fitschen who, despite fallout from the financial crisis, stuck to a costly universal banking model offering everything from mortgages in Germany to derivatives in London.

Deutsche is now belatedly following rivals such as UBS in axing unprofitable business lines to boost earnings and shore up its balance sheet.

?We have started asking ourselves if the current management is still capable of leading the company,? fund manager Ingo Speich at Union Investment, a top 20 shareholder, said ahead of the meeting.

?Deutsche Bank has failed to come up with an answer to the question of how to build a truly profitable business model in a changed interest rate and regulatory environment," he said.

Deutsche Bank made investment banking chief Jain and Fitschen co-chief executives in 2012. Jain has been criticised for being slow to reform Deutsche's investment banking business, which he led for many years.

Thursday's meeting will be the first test of whether the reshuffle is enough to assuage shareholder concerns.

Deutsche shares were down 0.30 percent, in line with a mild downward trend in the STOXX index of European banks <.SX7P>.

POWER SHIFT

Fitschen faces a lengthy court case in which he is accused of attempting to mislead investigators in a long-running battle with the heirs of the Kirch media empire.

Analysts at German brokerage Alpha said the power shift towards Jain reflected Fitschen's ongoing legal battle: "Fitschen surely is heavily bound by current court trial in Munich."

Shareholder adviser Hermes Equity Ownership Services had called on Wednesday for an overhaul of Deutsche Bank's management board, saying management was late to restructure the business in the face of regulatory changes.

"Valuable time and credibility has been lost," Hans-Christoph Hirt, a director at Hermes EOS, said in a statement.

Rival advisory firm ISS has already recommended that Deutsche Bank INVESTOR (INVEB.ES) should withhold their backing for management at the annual meeting.

Deutsche said on April 27 it would provide details of its restructuring plans within 90 days. Jain is now in charge of delivering on that commitment.

Deutsche also put Stefan Krause in charge of overseeing the growing transaction banking division, an important part of the group's new strategy. Krause is already due to hand his chief financial officer title to fellow board member Marcus Schenck.

Deutsche will also seek to make Krause supervisory board chairman of retail arm Postbank , which Deutsche aims to reform before selling by the end of 2016.

Deutsche confirmed that retail banking head Rainer Neske would leave on June 30. He will be replaced by Christian Sewing, who is also responsible for legal matters.

Alan Cloete, the bank's co-chief executive officer of Asia Pacific, will also leave in the near future. Prior to running Asia, Cloete was global head of finance and foreign exchange operations, which was the business responsible for making the price submissions that formed the basis for key interest rate benchmarks such as Libor.

Colin Grassie, the chief executive for the bank's UK operations, will also leave, Deutsche said.

(Editing by Alexander Smith and Jane Merriman)

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