Blame...Anshu Jain. As Deutsche Bank casts around for ways to cut costs by another €6bn (25%) by 2022, insiders are saying that the ex-ex-CEO set the scene for this horror when he decided to massively increase salaries for Deutsche Bank traders five years ago. As a result, a lot of people at Deutsche Bank have been receiving very large packages, paid predominantly in cash.
Jain hiked salaries in April 2014 following the imposition of the EU's cap on bonuses. While most other banks added an 'allowance' to salaries to sidestep the cap on bonuses of 200% of salary, Jain's Deutsche Bank decided simply to increase salaries and to reduce bonuses. An additional €300m was earmarked for the salaries of Deutsche's 1,700 highest earners; an average salary hike of €176k per head.
While Deutsche Bank's salary inflation started with Jain, it didn't end with him. Jain left Deutsche Bank in June 2015 and his successor as CEO, John Cryan, continued to bang the salary drum. Under Cryan, salaries were hiked further and bonuses were largely left unpaid in 2017. In 2018, Cryan increased salaries by another 10% for some vice president (VP) level staff at Deutsche in London.
As salaries increased, however, headhunters say Deutsche found itself backed into a corner. From a recent peak in April 2015 to today, Deutsche's share price has declined 80%. Faced with so precipitous a plunge, headhunters say some new hires at Deutsche were understandably unkeen to be paid in the bank's stock. As a result, the bank found itself to pay entirely in cash.
"There are people on the trading floor of Deutsche Bank now who are simply not paid in shares," says one headhunter. "They effectively get all-cash guarantees. Rather than pay a bonus, Deutsche will pay a £600k salary and no bonus. I've seen it happen a few times there in recent years."
At the same time, headhunters say Deutsche's existing staff have been enjoying the salary hikes that happened under Jain and then Cryan. In fixed income, some directors at DB are understood to have had their salaries increased from £200k to £400k between 2016 and 2017 alone. As a result, the bank now pays above the market, and has little flexibility on costs.
Deutsche declined to comment on the claims about its salaries. However, they were in evidence in the bank's most recent compensation report in March 2019. This said that the average salary for Deutsche Bank's 'material risk takers' was $785k last year, compared to $555k at Credit Suisse and $619k at UBS.
"People are asking why Deutsche bulked up salaries so much after the financial crisis," says one New York equities trader. "It created a cost base that was impossible to sustain. - The level of business that supported those numbers had gone and anyone who thought it was coming back was an idiot."
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