FRANKFURT (Reuters) - Qatari investors in Deutsche Bank DBKGn.DE want the lender's chairman to leave after he botched an attempt to appoint their envoy to the board, people familiar with the matter said.

FILE PHOTO - Chairman of the board Paul Achleitner delivers his speech during the annual shareholder meeting of Germany’s largest business bank, Deutsche Bank, in Frankfurt, Germany, May 23, 2019. REUTERS/Kai Pfaffenbach

The Qataris have been unhappy for months with Paul Achleitner’s stewardship of Germany’s largest bank amid a prolonged stock slump. His failure to get Swiss banker Juerg Zeltner onto the supervisory board was a breaking point, according to six people, including top shareholders, bankers and others with direct knowledge of the matter.

Representatives of the Qatari royal family have told Deutsche management and other major investors that Achleitner, 63, should announce his departure soon, these people said.

Two Qatari entities, Paramount Services Holdings and Supreme Universal Holdings, which are each controlled by senior members of the nation’s Al-Thani ruling family, have a combined stake of close to 10% in Deutsche Bank, one person familiar with the matter said, making them the bank’s largest shareholder.

One person said that Achleitner should leave in the coming months, while a second said he should announce his exit by next year’s annual general meeting in May at the latest.

Achleitner, whose term ends in 2022, has assured colleagues he has been looking for a successor.

Deutsche Bank and Achleitner declined to comment, as did Michele Faissola, CEO of Dilmon, a family office which looks after the Deutsche Bank investments held by members of the Al-Thani ruling family.

The soured relationship between Achleitner and the Qataris was described by 10 individuals, who spoke on condition of anonymity due to the sensitivity of the matter.

TURNAROUND EFFORTS

The move against Achleitner underscores the deep frustration with the Austrian. Deutsche Bank’s share price has dropped 70% since he took on his role in 2012.

Achleitner survived a motion to remove him at this year’s annual general meeting.

The former Goldman Sachs banker, who has overseen multiple changes of chief executive at Deutsche, has failed to arrest the decline of the bank. Earlier this year, merger talks with state-backed Commerzbank foundered.

Deutsche Bank’s aggressive expansion into investment banking has left it with multibillion euro fines for misconduct and years of losses.

After previously being criticized for moving too slowly to scale back the investment bank, Achleitner has supported Chief Executive Christian Sewing’s deeper overhaul to focus on Germany.

Sewing in turn has voiced support. “I am happy that he is here,” he said in September at a conference hosted by a regional German newspaper.

A CONFLICT OF INTEREST

The two primary Qatari investors are former Qatar Prime Minister Sheikh Hamad bin Jassim bin Jabor Al-Thani and Sheikh Hamad Bin Khalifa Al-Thani.

In 2016, when Achleitner was under pressure over Deutsche’s performance, Al-Thani’s investment vehicle Paramount came out in support of him, in a rare public statement.

Since then, relations have cooled.

At Qatar’s behest, Achleitner in August nominated Zeltner, a former UBS executive, onto the supervisory board.

But Deutsche’s regulators saw a conflict of interest because Zeltner is chief executive of KBL European Private Bankers, a business that overlaps with Deutsche’s and is controlled by members of Qatar’s royal family.

Regulators at the European Central Bank and Germany’s financial markets watchdog BaFin blocked the appointment this month.

It was an embarrassing misstep for Achleitner, one of Germany's best-connected corporate heavyweights, who is currently a director of Monsanto-owner Bayer BAYGn.DE and previously the Chief Financial Officer at insurer Allianz ALVG.DE .

Some regulators griped privately that Achleitner failed to informally clear Zeltner’s appointment with them before making it public, according to a senior official.

A name several investors floated as a potential candidate to replace Achleitner is Theodor Weimer, currently CEO of Deutsche Boerse DB1Gn.DE. Deutsche Boerse declined to comment but a person close to Weimer said he was in the midst of extending his current three-year contract.

Another is Nikolaus von Bomhard, currently chair of the boards of Munich Re MUVGn.DE and Deutsche Post DPWGn.DE. He declined to comment.