Seven things Deutsche Bank's fourth quarter results say about pay and hiring
Deutsche Bank's fourth quarter results are out for 2012. The full details aren't available yet - Anshu Jain and Jürgen Fitschen are embarking on the conference call accompanying the results as we write. But even at this stage, there are several things that anyone working in Deutsche's investment bank should be aware of.
1. Deutsche Bank says it's 'significantly reduced the bonus pool'
Figures aren't given for the bonus pool in the corporate and investment bank specifically, but across the bank bonuses are now a significantly lower proportion of revenues than they used to be. Witness the following chart from Deutsche's presentation.
2. Deutsche is reducing bonus deferrals
Managing directors will still have their bonuses deferred for five years, with all stock vesting in the fifth year (and, we understand, deferred cash bonuses vesting from year three), but it seems that the proportion of bonuses deferred will be lowered. This follows a recommendation from Deutsche's compensation panel that deferred bonuses should be reduced in order to lower the amount that Deutsche is committed to paying in future years.
Overall, 47% of bonuses will be deferred for 2012, down from 61% for 2011.
3. But Deutsche has increased compensation per head in the corporate and investment bank
For 2012, average compensation per head in Deutsche's corporate and investment bank is €216k. For 2011 it was €205k.
4. Deutsche is clearing out front office bankers and a growing proportion of its corporate and investment banking staff are in the back office
Deutsche Bank has begun breaking out the proportion of its corporate and investment bankers who work in the front and the back office. The back office accounts for a growing proportion of the total. In 2010, 62% of Deutsche's corporate and investment bankers were in the back office. In 2011, 65% were. In 2012, this proportion had risen to 68%.
At the same time, front office bankers are suffering disproportionately in Deutsche's redundancy programme. 1,700 jobs were removed from the corporate and investment bank last year, of which 1,300 (76%) were taken out of the front office.
5. Deutsche is going to offshore a lot more jobs in future
The bank says there is scope for transferring another 8,000 full time positions out of London, Hong Kong and Singapore to more 'cost-effective' locations.
6. Most of Deutsche's redundancies have already happened, hopefully
For the moment, people in Deutsche's corporate and investment bank should be safe. The bank said it had completed 1,400 of the 1,500 corporate banking and securities headcount reductions already announced by the end of 2012.
7. These are hard times for FX bankers
If Deutsche is struggling in FX, it doesn't bode well for other banks. Deutsche Bank has ranked as the top FX house for eight years' running in the Euromoney FX survey. Last year, it said FX volumes rose to record levels, but margin compression meant that FX revenues fell nonetheless.