Werner Schmidt
1943–



Chief executive officer, Bayerische Landesbank Girozentrale

Nationality: German.

Born: July 13, 1943, in Sindelfingen, Germany.

Family: Son of a foreman; married; children: two.

Career: Landesbank Stuttgart, 1971–1974, manager; 1974–1986, member of the board of managing directors; 1986–1989, deputy chairman; Südwestdeutsche Landesbank, 1989–1999, chairman; Landesbank Baden-Württemberg, 1999–2001, chairman; Bayerische Landesbank Girozentrale, 2001–, CEO.

Address: Bayerische Landesbank Girozentrale, Brienner Strasse 18, 80333 Munich, Germany; http://www.bayernlb.de.

■ Werner Schmidt rose from humble beginnings to become the leader of the number-one Landesbank in Germany. Regional banks were partly owned by the German government, which proved problematic during integration into the European Union. After successfully merging several regional banks throughout his career, Schmidt was charged with privatizing the Bayerische Landesbank Girozentrale (BayernLB) within four years so as to meet the EU deadline of 2005. Although Schmidt was sometimes considered rough, his goal orientation, determination, and perseverance would serve him well in accomplishing the monumental task.

HUMBLE BEGINNINGS

Werner Schmidt was born to a foreman on July 13, 1943. As he completed coursework in only the midlevel track of the three-tiered German high-school system—the upper tier of which prepared students for university, the lower tier for occupational training—few would have predicted that Schmidt would ascend to the head of the most powerful bank in Bavaria. Upon graduating from high school, Schmidt entered a

Werner Schmidt. AP/Wide World Photos.
Werner Schmidt.
AP/Wide World Photos
.

practical-training program at Kreissparkasse Böblingen, a regional savings bank.

Exhibiting potential early in his career, Schmidt became manager of the Landesbank Stuttgart in 1971. Three years later he was named a member of the bank's board of managing directors; in 1986 he became deputy chairman. In 1989 Schmidt led the merger of Landesbank Stuttgart and Badische Kommunale Landesbank in Mannheim, forming Südwest deutsche Landesbank (SüdwestLB). Schmidt was appointed chairman of the board of SüdwestLB, which became the central operator among the savings banks in Baden-Württemberg, and thusly had achieved a top rank in the German banking industry.

FROM REGIONAL TO INTERNATIONAL MANAGEMENT

SüdwestLB was the first Landesbank to be wholly owned by the state's savings banks; in 1990 SüdwestLB became the first regional bank to take a stake in WestDeutsche Landesbank, at the time Germany's largest public-sector financial institution. The move was intended to increase SüdwestLB's presence abroad. SüdwestLB then joined with WestDeutsche Landesbank Girozentrale in 1992 to purchase Chartered WestLB, a pan-European corporate-finance company.

In 1998, following increased national and international competition, SüdwestLB merged with Landesgirokasse and the commercial-banking unit of Landeskreditbank; Schmidt was credited with facilitating a smooth transition. The merger took effect on January 1, 1999, resulting in the formation of Landesbank Baden-Württemberg (LBBW), which immediately became one of the top public-sector banks in Germany. As chairman of LBBW's board of managing directors Schmidt led the business units of Controlling, Group Development/Equity Interests, Communications, and Accounting/Tax.

In addition to leading LBBW and later BayernLB, Schmidt served on the boards of directors for DekaBank, Bank für Arbeit und Wirtschaft, Lufthansa, Jenoptik, Wieland-Werke, Herrenknecht, Drees & Sommer, and others. He also served on the board of regents of the Univerity of Hohenheim and as chairman of the Freundeskreises der Ägyptischen Sammlung in Munich, a German-Egyptian alliance club. While living in Stuttgart he was honorary consul to the Empire of Japan for Baden-Württemberg.

FROM RETIREMENT TO NEW CHALLENGES

In February 2001 Schmidt handed over leadership of LBBW to Hans Dietmar Sauer, preparing to settle into retirement. The LBBW Web site quoted him as saying, "Now that LBBW is on a good course, the first helmsman can leave the ship. It is important to stop at the right moment, but one should never hesitate to start something new" (February 16, 2001).

Schmidt's departure from the world of banking proved temporary: in June 2001 he became chairman of the board of management of Bayerische Landesbank Girozentrale (BayernLB), the number-two bank in the nation. He was brought to Munich to restructure the bank in anticipation of new EU legislation. In 2000 the European Commission investigated the German regional banks (Landesbanken) for breach of antitrust laws; consequently the partially government-owned banks were issued a mandate to dissociate themselves from the state as a guarantor of funds by 2005.

BayernLB was jointly owned by the Association of Bavarian Savings Banks and by the government of Bavaria; thus Bayerische Landesbank Girozentrale acted as the principal bank to the state of Bavaria and as the central clearing house for Bavarian savings banks (Sparkassen). BayernLB also offered privatebanking services to individuals and corporations in the form of deposits, loans, and insurance. In 2001, led by Schmidt, the company announced its privatization plan. Schmidt's determination, follow-through, and ability to integrate were cited as key elements in the successful accomplishment of the transformation. Schmidt noted in Die Welt Am Sonntag , "In cooperation with our shareholders, the free state of Bavaria and the Bavarian Sparkassen, we considered the future of BayrenLB early on. It is likely that Bavaria would be the first German State to fulfill the new legal requirements" (September 30, 2001).

In 2002 BayernLB created a holding concern, through which speculators could invest in up to 49.9 percent of company shares. The bank's joint owners, the Association of Bavarian Savings Banks and the government of Bavaria—each holding a 50 percent stake—transferred their stock in BayernLB to BayernLB Holding. The French state banks Caisse des Dépôts et Consignations (CDC) and La Caisse Nationale des Caisses d'Épargne et de Prévoyance would acquire a 5 percent stake. CDC and BayernLB planned to eventually coordinate privateequity, asset-management, and capital-markets operations. BayernLB had already worked closely with Landesbank Hessen-Thüringen, having created joint ventures in financing, information technology, and a security depository called Transaktionsbank Frankfurt-München.

INHERITING CORPORATE CHALLENGES

Schmidt initially planned to focus BayernLB's operations on Bavaria and the bordering regions of Austria and Switzerland in addition to continuing its alliances with France and Hessen-Thüringen. Some of those stakes had to be sold off, however; when Schmidt took over the helm at BayernLB, the company was steeped in numerous bankruptcy scandals. Among its clientele were SchmidtBank, Enron, WorldCom, Fairchild Dornier, Holzmann, Herlitz, and Kirch Media, all of which filed for bankruptcy between 2001 and 2003. To counteract the associated losses, Schmidt started a "return to our roots" campaign in which international offices were systematically sold in order to generate cash flow. The largest transaction was the 2004 sale of BAWAG, the fourth-largest bank in Austria, in which BayernLB had held a 46.4 percent stake. The chain-smoking Schmidt did not mind the challenge; he told Fidelius Schmid of the Financial Times Germany , "I always wanted to be an entrepreneur" (February 12, 2004).

The self-proclaimed cultural revolutionary Schmidt waned in popularity in early 2004 when he withdrew funding from Aero Lloyd, stranding committed passengers and forcing the airline into bankruptcy. Due to downgrades from credit bureaus—from A minuses to BBB—Schmidt was forced to diminish risk, implement cost savings, and further reduce offices and personnel. Although the initial integration plan called for a two-year transition period through 2005, Schmidt accelerated the time frame in order to complete the privatization by the end of 2004. In Schmid's Financial Times Germany article, the delegate Peter Kahn called Schmidt "a doer, impatient, and decisive. He is the right man for this task" (February 12, 2004).

OPTIMISM FOR A SUCCESSFUL PRIVATIZATION

By mid-2004 BayernLB had doubled its financial performance from the prior year. Still Schmidt planned to eliminate five hundred positions by 2005 in addition to the five hundred that had already been scrapped by 2003. Schmidt noted that the remaining reductions would require voluntary resignations, a move generally frowned upon in the German business world. Schmidt assured the public that no additional job eliminations would occur. In early 2004 Schmidt declared that BayernLB had already met some of its goals for the year, such as reaching the core-capital quota of 7.8 percent. Capital interest was expected to meet the pretax figure of 15 percent by 2005, up from 4.9 percent in 2003.

Although he had known the transition from state-backing to privatization would prove challenging, Schmidt had embraced the task. He inspired camaraderie from counterparts, such as his successor Hans Dietmar Sauer at LBBW and Thomas Fisher at WestLB, whose firms were the second- and third-largest regional banks, respectively, and who faced the same transition that Schmidt did.

When asked about the sort of legacy he wanted to leave behind, Schmidt portrayed himself as interested not exclusively in the business world. He described how a mix of professional expectations; private life, in spending time with his wife and two sons; and hobbies, including skiing and other sports, together brought him tremendous joy.

sources for further information

"BayernLB beschleunigt Stellenabbau" (BayernLB Accelerates Layoffs), Financial Times Germany , May 4, 2004, http://www.ftd.de/ub/fi/1083399493565.html?nv=se .

Ehrensberger, Wolfgang, "Landesbank-Chef sucht Partner" (Landesbank-Chief Seeks Partner), Die Welt Am Sonntag , September 30, 2001, http://www.welt.de/daten/2001/09/30/0930mu285573.htx?search=Landesbank-Chef+sucht+Partner&searchHILI=1 .

"LBBW: Mr. Schmidt Hands Over the Helm to Mr. Sauer, Limbach Leaves the Ship Sailing on Course," Landesbank Baden-Württemberg, February 16, 2001, http://www.lbbw.de/lbbw/html.nsf/webdokumente/framebooster.htm?OpenDocument&url=SPIT-4TZLE7_fs.htm .

Reitz, Ulrich, "Stoibers Bank für alle Fälle" (Stoibers Bank for All Occasions), Die Welt Am Sonntag , May 5, 2002, http://www.welt.de/daten/2002/05/05/0505wi330155.htx?search=werner+schmidt&searchHILI=1 .

Schmid, Fidelius, "Werner Schmidt, der Kulturrevolutionär" (Werner Schmidt, the Cultural Revolutionary), Financial Times Germany , February 12, 2004, http://www.ftd.de/cms/gate2?pAssettype=FtdArticle&pAssetID=1077011637585&pStyle=plainhtml?nv=se .

"Werner Schmidt feiert seinen 60. Geburtstag" (Werner Schmidt Celebrates His 60th Birthday), Bayerische Landesbank Girozentrale, July 10, 2003, http://www.bayernlb.de/p/_de/idx/presse/presse/meldung.jsp?pmoid=12366 .

—Maike van Wijk



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