Deutsche Bank's fixed income traders are lining up for a pep talk

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A week and a half after Deutsche's new retail banking CEO presented his strategy to investors, Deutsche's fixed income salespeople and traders are in line for a little pep talk. Ram Nayak, the former Credit Suisse structurer who heads Deutsche's combined rates, credit, foreign exchange, emerging-market debt, and structured-finance trading business is hosting a town hall for his people this afternoon. As the engine-room of Deutsche's investment bank, they need some reassurance.

Nayak isn't the first Deutsche bank boss to steady the ship since Sewing's succession. We understand that Alasdair Warren, the head of Deutsche's corporate and investment bank in EMEA, also attempted pepping his people up at his monthly town hall meeting a few weeks ago. Among other things, Warren reportedly assured Deutsche's European bankers that Sewing isn't totally parochial because he spent some time working for Deutsche in Toronto. Nayak's colloquy is more important: fixed income trading generated 50% of revenues at Deutsche's investment bank in the first quarter (compared to 12% for Warren's investment banking division globally). If Nayak can't persuade his troops to do battle, Deutsche's investment bank will be in trouble.

Nayak's task isn't entirely straightforward. Although Deutsche has promised to prioritize elements of its European fixed income trading business under Sewing, the U.S. rates desk has been scaled back (with some U.S. traders reportedly offered seats in London instead) and the European business has been destabilized by the exit of the brilliant - if controversial - Sam Wisnia for hedge fund Eisler Capital, along with his deputy Kal El-Wahab.

It doesn't help, either, that Deutsche's share price is down 28% since January, to just €11.43, leaving anyone who received John Cryan's February 2017 retention bonuses, which are only worth something if DB's share price hits €23 during the first three trading weeks of 2021, with almost no chance of getting anything at all.

The good news for Nayak is that Deutsche's most valued people are locked-in by bonuses that vest in their entirety only five years after they were paid. With the bank's share price down 60% in a five year period, to its lowest level ever, few senior bankers will want to be bought out at this level. And although Deutsche's equities bankers are occasionally finding homes elsewhere, headhunters say there just isn't that much demand for senior fixed income traders with a dead weight of five years' stock bonuses behind them. "The Deutsche traders I talk to are kicking themselves for not moving sooner," says one headhunter. "And now they can't. It's like selling a house - you're worth nothing until there's a buyer, and there are none."

The pepping-up comes after Colin Fan, the former head of Deutsche's securities division received $6m in compensation for bonuses that were withheld in relation to a probe into personal trades that were alleged to have contravened conflict of interest rules.  The compensatory payment looks like an exoneration for Fan. Ioannis (Yanni/John) Pipilis, Deutsche's current co-head of credit trading, was also named at the time of the original investigation into the trades, and - despite having being cleared by the bank already - seems further exonerated by Fan's payment too.

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