Dive Brief:
- Deutsche Bank on Thursday reported a net loss of $5.8 billion in 2019 as it shoulders its effort, announced in July, to cut 18,000 employees. The annual loss is the bank’s fifth straight. Deutsche is also expected to dispose of one-fifth of its total assets by 2022 and suspend its dividend for two years in its overhaul.
- However, the bank saw a 31% increase in fixed-income trading in the fourth quarter. The surge mirrors a spike in the trading sector across the banking industry.
- The quarterly report comes as Germany’s largest lender announced a number of changes in compensation.
Dive Insight:
The bank is delaying employee pay raises for 2020 until April 1, instead of the usual Jan. 1, the New York Post reported Tuesday. In a memo the Post obtained Monday, Deutsche’s chief executive, Christian Sewing, cited an urgent need to cut costs after years of scandals and fines.
"For the bank to be competitive and meet its goals for sustainable returns to shareholders it is vital that we further manage costs in a disciplined manner," Sewing wrote. "This also relates to compensation."
The bank said the change is permanent: The annual effective date for pay adjustments will continue to be April 1. Bonuses, however, will be announced and paid by the end of March, as before, the Post reported.
Deutsche announced last month that it’s considering cutting its bonus pool for employees by up to 20%. The bank’s senior executives may also take home at least a portion of their bonuses, in contrast to a recent practice that they be waived in unprofitable years.
Deutsche’s management board did not receive any variable compensation from 2015 to 2017, the Financial Times reported, adding the bank’s nine board members have agreed to forgo about half of their variable pay for 2019. That covers the component that reflects individual performance, a spokeswoman told Bloomberg. The board members would still get awards for group performance and other benefits that add up to about $14.6 million, she said. That’s about half of the $28.4 million in bonuses top Deutsche executives received in 2018, according to the Financial Times.
The past month has shown strong performance isn’t necessarily an indicator of generous bonuses. JPMorgan reported Monday it was keeping bonuses relatively flat at its corporate and investment bank, yet revenue rose 9% companywide compared with last year. Morgan Stanley said this month that it was cutting bonuses staffwide to offset a 7% jump in other compensation expenses. The bank’s profit increased 46% last year.
In its earnings call Thursday, Deutsche Bank said it booked transformation charges of 608 million euros in the fourth quarter, and restructuring and severance expenses of 473 million euros, according to Bloomberg.
The boost in bond trading mirrors figures at other global banks last quarter. Bond trading revenue was up 86% for the quarter at JPMorgan Chase, 49% at Citi and 25% at Bank of America, compared with a year earlier.
But it also may signal a pendulum swing back to stability, which Deutsche may have been seeking among its top echelon when it offered three-year contract extensions to CFO James von Moltke and Chief Risk Officer Stuart Lewis.
