Morning Coffee: Deutsche Bank’s cunning way of paying its bankers. Don't let banking ruin your love life in your 20s
Deutsche Bank is cracking down on bonuses during times of strife. It’s forcing, or is likely to force, its bankers to accept more their variable pay in shares from its non-core unit or – even worse – in shares of Deutsche Bank itself.
Right now, Deutsche Bank employees receive around half of their bonuses in immediately available cash, and 49% in deferred cash or stock. In an effort to appease investors and boost capital buffers, CEO John Cryan is considering his options. Right now, this could be (presumably newly-issued) shares in Deutsche’s shrinking non-core unit, or requiring employees to simply accept more company shares.
Right now, of course, Deutsche’s share price has been tanking, but whether this continues if, or when, the bank reaches an agreement with the U.S. Department of Justice over its $14bn fine is debatable. Meanwhile, its non-core unit is shrinking - it had €27.8bn in risk weighted assets (RWAs) in June, 80% less than when it was created in 2012. It seems like a hospital pass.
But Credit Suisse bankers no doubt complained about its decision to award $5.5bn in ‘toxic bonuses’ in 2008 – a popular decision with investors at the time. By 2012, these had risen by 75% while the bank’s share price had dropped by 23%.
Similarly, as one retired derivatives trader told us recently, Merrill Lynch issued performance option plans (POPs) to its traders during the 1998 Asian crisis, which only vested once they covered their cost of capital. They were issued in plentiful supply because of their lower fair value, but when things turned around, 1999 and 2000 turned out to be very good years indeed.
“Deutsche’s top bankers know it’s been done in the past and they’ll be pressuring Cryan to do it again. Watch for some kind of pay announcement dressed up shareholder kindness,” he said. You heard it here first.
Separately, it’s known that analysts going into IBD invariably leave all their friends and partners behind because the job eats up so much of their life. If you think you can pack it all in at 30 and focus on your personal life, bad luck.
Your 20s are for learning the basics of how relationships work, says Quartz. Sacrifice this for your career and by the time you reach your 30th birthday you will be starting from scratch when your brain is less adaptable. It’s too late!
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One man's daring 3.30pm escape from the office (The Onion)
Photo: Borut Trdina/Getty Images