Deutsche Bank is slashing the bonus pool for its investment bankers by 40 per cent, one of the most severe cuts in the industry, while increasing the payouts for traders.
People familiar with the matter said the overall bonus pool for Deutsche’s investment banking division would fall by less than 10 per cent, with much bigger declines for dealmakers in mergers and acquisitions and capital markets.
Staff at the fixed-income trading unit of the investment bank will see an increase in their incentive pay after revenue climbed by a quarter in the year to September 30, a trend that continued in the fourth quarter, the people said.
Deutsche declined to comment.
Revenues from the unit that offers advice on M&A and raises debt and equity for clients collapsed 58 per cent in the first nine months of the last year, alongside many of its global competitors.
Deutsche was also hit by a sharp decline in leveraged loans for private equity deals and suffered valuation losses on existing loans that it holds on its balance sheet, people familiar with the matter told the Financial Times.
Chief executive Christian Sewing has overseen a restructuring of Deutsche’s investment bank in recent years, exiting equity trading and pulling back from the US. He is also under pressure to keep expenses under strict control after years of losses that damaged the bank’s reputation.
In a study by the research arm of German asset manager Flossbach von Storch, Deutsche this month was ranked as the top destroyer of shareholder value over the past 20 years among 1,013 listed German companies. Germany’s largest lender destroyed a total of €25bn, according to Flossbach von Storch, more than defunct Wirecard, Hypo Real Estate and Arcandor combined.
In July, Sewing ditched an already reduced cost-cutting target for 2022, blaming inflation, costs from exiting Russia and higher taxes and litigation costs. The shares have risen 2 per cent in the past 12 months, but are down 24 per cent in the past five years.
The significant reduction in the advisory bonus pool is in line with Goldman Sachs but more substantial than JPMorgan Chase, Citigroup and Bank of America, which the FT has reported are set to cut their investment banking bonus pools by about 30 per cent.
Deutsche’s larger fixed income and currencies trading arm thrived from higher market volatility on the back of the first substantial global interest rates rises in more than a decade and the war in Ukraine, offsetting the drag from the advisory side of the investment bank.