Deutsche Bank is cutting the bonus pool for its investment bankers by 40 percent, one of the biggest cuts in the industry, while increasing payouts for traders.
People familiar with the matter said the total bonus pool for Germany’s investment banking arm would fall by less than 10 percent, with much larger falls for dealmakers in M&A and capital markets.
Employees at the investment bank’s fixed income trading unit will see their incentive fee increase after revenue rose by a quarter in the year ended Sept. 30, a trend that continued in the fourth quarter, the people said.
The German declined to comment.
Revenue for the unit, which provides M&A advice and raises debt and equity for clients, plunged 58 percent in the first nine months of last year, along with many of its global peers.
The German was also hit by a sharp drop in leveraged loans for private equity deals and suffered valuation losses on existing loans it holds on its balance sheet, people familiar with the matter told the Financial Times.
CEO Christian Sewing has led a restructuring of Deutsche Bank’s investment bank in recent years, exiting stock trading and withdrawing from the US. He’s also under pressure to keep spending tightly under control after years of losses that have tarnished the bank’s reputation.
A study by the research arm of German wealth manager Flossbach von Storch this month ranked the German as the biggest destroyer of enterprise value over the past 20 years out of 1,013 listed German companies. According to Flossbach von Storch, Germany’s largest lender destroyed a total of 25 billion euros, more than the defunct Wirecard, Hypo Real Estate and Arcandor combined.
In July, Sewing scrapped an already reduced 2022 cost-cutting target, blaming inflation, costs of exiting Russia, and higher taxes and litigation costs. Shares are up 2 percent over the past 12 months but have fallen 24 percent over the past five years.
The significant reduction in advisor bonus pools is on par with Goldman Sachs, but more significant than JPMorgan Chase, Citigroup and Bank of America, which the FT has reported will cut their investment banking bonus pools by about 30 percent.
Deutsche Bank’s larger fixed income and currency trading arm benefited from higher market volatility resulting from the first significant global interest rate hikes in more than a decade and the war in Ukraine, offsetting the strain from the investment bank’s advisory side.