Deutsche Bank's CEO vows to halt an employee exodus after a plunge in bonuses sees bankers head for the door
- Deutsche Bank insiders are worried about compensation, even despite a boom in FIC revenues and signs the company's turnaround plan is bearing fruit.
- An analyst asked bank executives on a call how they will motivate and keep employees - showing that top staff is at heart of the company's trading performance.
- The bank's CEO said: "By differentiating and clearly looking for the operational performance and balancing the compensation around this one, I'm confident that we will not see higher attrition in 2020 versus 2019."
- "Deutsche Bank will still attract people, but it won't attract the creme de la creme like it used to," one source told Business Insider.
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Deutsche Bank posted a pleasant surprise for investors on Thursday. Faced with mushrooming costs of a massive overhaul of the investment bank that will eventually see the departure of some 19,000 employees, the bank says its turnaround is well underway.
While posting a whopping bigger-than-expected loss of 5.7 billion euros ($6.3 billion) for the full year, traders cheered a 30% boom in fourth-quarter revenue at the fixed-income and currencies unit, led by credit and especially the rates business, which doubled. The shares rallied about 3.5%.
The optimism from investors masks a continued gloom among insiders, however. Adding to the sting: A memo to staff this week, first reported by the New York Post, said that bonuses will be pushed back this year.
"Senior management is happy, but that doesn't translate to compensation for the rest of us," one insider in the bank's investment banking unit told Business Insider.
The issue isn't just on the minds of grumbling staff. Barclays analyst Amit Goel, on a conference call after earnings on Thursday, asked Deutsche Bank executives about preventing an employee exodus.
"How are you trying to motivate and continue to drive the employees to get that top line to continue to tick over?" Goel said.
CEO Christian Sewing responded: "We are steering that we will see a reduction in overall arrival comp," said Sewing. But, he said, "we have done everything in order to appreciate and acknowledge the performance in particular of those colleagues and those businesses which from an operational point of view, have reached their targets. In this regard, it is very much about differentiation."
Sewing continued: "It's also very much about motivation and day-to-day leadership," Sewing said on the call. "By differentiating and clearly looking for the operational performance and balancing the compensation around this one, I'm confident that we will not see higher attrition in 2020 versus 2019."
His words didn't soothe one staffer. "Everyone is in the market [looking for alternate jobs] but doesn't seem like there's headcount" at other companies, another Deutsche Bank insider told Business Insider.
Hundreds of thousands of jobs have disappeared from the finance industry since the global crisis of 2008, and the process has been sped up by regulation, Brexit, low to negative interest rates, and increased adoption of automation and technology. Back in July, when Deutsche Bank announced it's overhaul plan, an insider at a dominant bulge-bracket firm told Business Insider that any poaching of top talent from Deutsche Bank had been done long before.
"Talking to heads of desks and managers, there are big concerns about how they're going to keep their people," one source told Business Insider on Thursday. Because few firms in the region aren't hiring either, "they can probably get away with not paying people" big salaries and bonuses that were once common in the industry, the person said.
The overall bonus pool for the bank is down about 20% from last year, with investment banker bonuses facing cuts of about 30%, Bloomberg reported. "Deutsche Bank will still attract people, but it won't attract the creme de la creme like it used to," the source said.
Fixed income, currency, and commodities revenues have been shrinking for years, hitting a five-year low of $64.2 billion among the dozen largest banks in 2018, according to consulting and data firm Coalition.
Employees in front office financial roles view Deutsche Bank negatively, according to data from the employment ranking website Glassdoor. While the average approval rating for CEO Sewing is 73%, the average company rating is about 3.5 stars out of five, and the ranking of senior leadership is a ho-hum 3.2.
"We will continue to compensate employees for their qualifications, experience and skills, commensurate with the requirements, size and scope of their role," a Deutsche Bank spokesman said in an emailed comment. "The only thing that will change is the date for annual review fixed pay adjustments to become effective. In future, this date will be April 1, instead of January 1."
Read more: I'm a senior banker at Deutsche Bank. Here's why I'm worried about its bond business.