Deutsche Bank cuts the bonuses of investment bankers but gives traders raises. Deutsche Bank is making one of the most significant cuts in the business by reducing the bonus pool for investment bankers by 40 percent while increasing rewards for traders.
According to those in the know, Deutsche’s investment banking division’s total bonus pool will decrease by less than 10%, with dealmakers in mergers and acquisitions and capital markets seeing substantially more significant reductions.
The sources said that revenue at the investment bank’s fixed-income trading division increased by a quarter in the year ending September 30, and the upward trend continued into the fourth quarter, the sources said.
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German airline Deutsche has remained silent.
The business segment that provides advice on mergers and acquisitions and helps customers raise financing and equity had its revenues drop by 58% in the first nine months of last year, in line with the declines of many of its global competitors.
The Financial Times cites “people familiar with the subject” as saying that Deutsche was also impacted by a steep drop in leveraged loans for private equity acquisitions and valuation losses on existing loans it keeps on its balance sheet.
In recent years, Deutsche’s CEO Christian Sewing oversaw a reorganization that saw the bank withdraw from equity trading and reduce its presence in the US market. After years of losses that tarnished the bank’s reputation, he is also under pressure to keep spending under rigorous control.
German asset management Flossbach von Storch’s research division released a report naming Deutsche as the top killer of shareholder value among 1,013 listed German firms over the previous 20 years. According to Flossbach von Storch, Germany’s largest lender lost a collective €25 billion, more than the total assets of the bankrupt financial institutions Wirecard, Hypo Real Estate, and Arcandor.
Sewing abandoned its already-reduced cost-cutting goal for 2022 in July. The company cited rising inflation, expenses associated with the decision to leave Russia, and increased tax and litigation expenses as the reasons for the decision. The stock price has increased by 2% during the previous 12 months, while it has decreased by 24% over the past five years.
Similar to Goldman Sachs, but more so than JPMorgan Chase, Citigroup, and Bank of America, whose investment banking bonus pools would reportedly be reduced by around 30% according to the FT, the advising bonus pool has been significantly reduced.
Offsetting the drag from the advisory part of the investment bank, Deutsche’s more considerable fixed income and currencies trading arm prospered from heightened market volatility on the back of the first substantial global interest rate rises in more than a decade and the war in Ukraine.