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Deutsche Bank's top investor to outsource shareholder voting

BlackRock, the largest single shareholder of Deutsche Bank, won’t vote on the performance of the bank’s management and supervisors at an annual meeting that’s shaping up to be one of the season’s most contentious.

Shares of Germany’s largest lender fell to a fresh record low on Monday as pressure mounts on management to show it can restore growth and profitability after a series of failed turnaround efforts. Last month, it broke off merger talks with Commerzbank, leaving investors guessing what’s next in terms of strategy. The world’s biggest shareholder advisory firms recommending voting against the supervisory and management boards.

BlackRock, the world’s largest investment firm with $6.5 trillion under management, has mandated a specialized company to cast the votes in its stead when Deutsche Bank’s shareholders convene in Frankfurt on Wednesday, people familiar with the matter said, asking not to be identified in discussing private information.

NYSE BlackRock Tickr Image for March 2017
Blackrock Inc. signage is displayed on a monitor on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, March 31, 2017. Photographer: Michael Nagle/Bloomberg

The decision was made for reasons having to do with regulation, they said. “BlackRock appoints an independent fiduciary to vote proxies where we are required by regulation or where there are actual or perceived conflicts of interest,” a spokesman said. He declined to explain the reasons or name the companies where BlackRock has outsourced voting.

The Deutsche Bank meeting comes after several large European companies saw investors revolt against management. Shareholders in Bayer rebuked the drugmaker’s CEO over the $63 billion acquisition of Monsanto and the handling of legal challenges linked to the deal. ING’s boards failed to get investor backing over the handling of money laundering issues, and UBS Group saw an uprising over a $5 billion penalty the bank had to pay for helping clients evade taxes.

Yet none of these companies has asked investors to endure such a dramatic slide in the stock in recent years as Deutsche Bank, whose shares slumped as much as 3.5% Monday to $7.38. Commerzbank, which holds its shareholders’ meeting on Wednesday, fell as much as 4.5%.

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“These meetings are not going to be fun for the boards or the management undoubtedly,” Philipp Hildebrand, vice chairman of BlackRock, said in an interview on Bloomberg TV Monday. The lenders must find “an answer to the business model problem which has been at the core of European banking.”

Shareholder advisory firms ISS and Glass Lewis have recommended voting against the supervisory board. The meeting agenda also includes a motion to oust Chairman Paul Achleitner. Glass Lewis recommended shareholders abstain from that vote, while ISS said shareholder should vote against ousting the chairman.

BlackRock owns 4.8% in Deutsche Bank, according to data compiled by Bloomberg, making it the lender’s largest shareholder. A big chunk of the stake is held through investment funds that passively track stock indexes.

Bloomberg News