Is Deutsche going to be a massive payer for 2010?
Deutsche announces its results this Thursday and is expected to start announcing its bonuses over the next few days.
Initial indications are that the overall size of the investment banking compensation pool should be relatively pleasing.
Deutsche provided a preliminary update on its fourth quarter performance yesterday.
This revealed that whilst costs in the corporate and investment bank have increased due to the 'increased integration measures' we pointed out previously, revenue performance has been better than expected.
Dirk Hoffman Becking, senior analyst at Bernstein Research, expresses his surprise thus:
Revenues of €7.4bn are €300m higher than the €7.1bn we forecast. We expect this to come from the CIB, implying that at least Deutsche Bank did materially better QoQ than the US banks (-11% overall vs. -16% for the US banks). That is remarkable, as the bright spot in Q4, 2011 was advisory and underwriting a business that DBK has traditionally been underweight, indicating that the efforts to build up the presence are finally bearing fruit.
What with this unexpected €300m boost to revenue, Becking says €135m more than anticipated is likely to be added to the corporate and investment bank's compensation pool.
This is exciting, given that most US banks had a tired fourth quarter and adjusted pay downwards accordingly. It's also exciting given that, at the end of Q3, pay per head at Deutsche was higher than at Goldman Sachs.
Some caveats
Before any Deutsche Bankers explode with joy, it's worth noting, however, that the German bank's numbers aren't always particularly reliable.
"You can't really pay any attention to Deutsche's reported numbers for the corporate and investment bank," says Simon Maughan, head of European banks research at MF Global. "Their corporate centre is huge and a lot of what happens there is related to the investment bank."
By effectively cutting out operations staff, Deutsche may therefore be overstating investment banking pay per head.
Given that expenses across the group are also up by €2.1bn on the fourth quarter of 2009 due to 'integration costs', there's a possibility too that Deutsche could seek to squeeze pay in the style of Morgan Stanley. All will become amply clear soon.
