If you work for Deutsche Bank, you should really have given up on your bonus for 2016. As we were first to report a few weeks ago, the German bank won't exactly be paying bonuses this year: it will pay no cash at all to employees at vice president, director and managing director level and most people will receive only a "group component" of compensation which has nothing to do with their individual performance. However, a small proportion (around 10% to 20%) of Deutsche's most prized staff are going to be getting a "retention payment." And it's this retention payment that's raised hopes and now looks set to dash them again.
Deutsche's bonuses aren't due to be announced until early March, but some senior Deutsche bankers are already understood to be familiar with the structure of the retention package, and to find it lacking. The problem is said to be the "strike price:" the retention component is reportedly being issued in the form of stock which vests over five years but is only "in the money" if the share price hits €23 in the 10 days before it's sold.
This is a big hurdle. Deutsche's share price currently stands at €18.8 and will therefore need to rise by 20% for the retention packages to be worth anything. Worse, Deutsche's stock spent much of last year trading below €16. The bank's share price hasn't traded at €23 since November 2015 and the consensus target right now is just €15.3. Sure, Deutsche has benefited from the Trump rally in recent months, but the bank has the potential to be hit by further capital shortfalls in the run-up to 2018.
As a result, headhunters say senior Deutsche bankers are wondering whether their shiny retention packages are really worth anything. There also said to be complaints about the distribution of the retention bonuses: most rates traders are said to be beneficiaries, even though their out-performance in 2016 was arguably more to do with global events than their own particular skill.
Deutsche Bank declined to comment.
Separately, Dealbreaker reported that Alasdair Warren, Deutsche's EMEA head of M&A, stood up in a recent town hall and told Deutsche Bank employees that 2017's bonuses won't be as bad as 2016's. The comment is said to be causing friction as Warren himself is thought to be on a multi-year guarantee after joining from Goldman Sachs in November 2015. Dealbreaker also claimed that Deutsche is expediting new salary increases for analysts and associates following Warren's remarks. However, senior Deutsche insiders said this isn't the case and analysts say they know nothing of any coming salary hikes.