Does Deutsche need to cut headcount too?
Deutsche is rumoured to be following in the footsteps of Credit Suisse, BarCap and RBS and planning headcount cuts in the fourth quarter. According to Dealbreaker, 5% of the global markets workforce is being axed in the next month, with names already selected.
At the end of the second quarter, headcount Deutsche's corporate and investment bank was 15,852, up 1,725 on the previous year, but down from the 16,293 the bank employed in 2007.
The compensation ratio at the corporate and investment bank was a seemingly exemplary 29%, compared to 43% at Goldman Sachs and 50% at UBS. However, comparisons are obscured by the fact that Deutsche accounts for its investment banking back office separately.
Headhunters point out that cuts of 5% are no big deal and that Deutsche does it every year. "They're known for being fairly overstaffed as a platform," says one. "It's usual for them to weed out poor performers before bonuses are paid."
A few weeks ago, Josef Ackermann said Deutsche's third quarter results were on a par with 2009 after a strong second half to September.
Simon Maughan, banking analyst at MF Global, says Deutsche is no 'stand out case,' but that something needs to be done about compensation costs across the industry.
"Banks have raised salaries quite substantially and removed the flexibility in their cost bases. Looking at business volumes, they are faced with a difficult choice - you either reverse the trend for higher salaries, or you have to lose headcount," he muses.
