Deutsche Bank AG’s management board plans to cut the bonus pool by around 10 percent as the German lender juggles cost pressures while trying to retain key employees, according to people familiar with the matter.
Bonuses for last year will be paid more selectively in an attempt to keep top earners, the people said, asking not to be identified because the deliberations aren’t public. The final figure could still change, depending on fourth quarter results, they said. The bank awarded about 2.2 billion euros ($2.5 billion) in bonuses for 2017.
A Deutsche Bank spokesman declined to comment.
Chief Executive Officer Christian Sewing is seeking to keep a lid on costs while holding on to key staff that generate revenue for the troubled firm. Top executives have repeatedly said that the lender will pay “competitively” after a number of departures. But a slump in the stock, headwinds from markets and more legacy scandals have made that difficult.
“Deutsche Bank has a severe talent loss problem and this bonus cut will exacerbate the problem,” said Tim Zuehlke, managing partner at Frankfurt-based executive search firm FRED. “Focusing on top performers is not new and not the solution.”
Deutsche Bank lost more than half its value over the past year. The share price is less than half what it needs to be for previously granted retention awards to vest, frustrating many top performers, people familiar with the matter have said.
Departures since Sewing took over include Tadhg Flood, co-head of Deutsche Bank’s global team of bankers advising financial-services clients. In the Americas, it lost Charlie Dupree, its top M&A dealmaker for the region, to JPMorgan Chase & Co., as well as dealmakers such as Jeff Rose to UBS Group AG.
The bank’s revenue last year is on track to hit the lowest since the 2008 financial crisis. The fourth quarter was negatively affected by police raids on the lender’s headquarters in November and a “weak market environment,” Chief Financial Officer James von Moltke told Bloomberg last month.
Sewing has made controlling costs a centerpiece of his strategy. Shortly after becoming CEO in April, he announced a target to cut at least 7,000 jobs by the end of this year, many of them in the investment bank. The bank has since said that it cut over 1,000 front office jobs in the division in the second and third quarter.
Even before the cuts, the bonus pool shrank over the years as the bank made fixed pay a larger part of compensation.
Recruiting firm Options Group predicted in a report last year that Wall Street equity traders would get a slight bump in compensation, while bonuses for fixed-income traders drop. Morgan Stanley is planning to increase bonuses for dealmakers and traders, businesses that are on pace for a bigger revenue jump than at the firm’s rivals, a person familiar with the matter said last month.