Deutsche Bank Walking Bonus Tightrope as ECB Urges Restraint
(Bloomberg) -- Deutsche Bank AG wants to award bonuses that are sufficient to keep talented staff from jumping ship, while heeding calls from the European Central Bank to conserve capital in the pandemic.
“We’re obviously very mindful of the guidance that we’ve got from the ECB to apply moderation in variable compensation,” Chief Financial Officer James von Moltke said in a Bloomberg TV interview. “We of course need to balance that with what was a strong performance year and the need to compensate people for that performance on a competitive basis.”
Major investment banks are under pressure from high-performing staff to pay out handsomely amid soaring revenue in the past year, even as the global economy slumped. That puts bank leaders in the position of needing to reward traders, while not paying excessively during a time of hardship for many outside the industry.
Deutsche Bank’s fixed income trading arm increased its revenue by 17% in the final three months of the year, the second straight quarter in which it beat most Wall Street peers. The division has become increasingly important to Chief Executive Officer Christian Sewing’s deep overhaul of the company as other businesses see earnings sliced by negative interest rates.
The bank was considering raising bonuses for traders by an average of 10% as a way to attract and retain talent, Bloomberg reported in December. That figure may rise given the fourth-quarter performance, a person familiar with the matter said earlier this week.
Last month, Bank of America Corp. scrapped a plan to impose major bonus cuts on some staff after it provoked the ire of dealmakers.
Deutsche Bank awarded staff 1.52 billion euros ($1.82 billion) in bonuses for 2019, of which 602 million euros was for its investment bank, according to the company’s annual report.
Andrea Enria, who leads the ECB’s bank oversight arm, has called on banks to exercise “extreme moderation” on bonuses to bolster financial reserves to swallow losses and keep lending. He suggested last week that banks could delay compensation or rely on payments in instruments such as shares.
Deutsche Bank and other firms frequently defer portions of bonuses by several years, depending on the seniority of staff.
“We naturally looked at our deferral policies in the context of this year’s variable remuneration awards and also the guidance that we received,” von Moltke said in the interview with Bloomberg’s Daniel Schaefer on Thursday in Frankfurt.
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