Deutsche Bank may not be paying bonuses until March, but in Asia potential losers from its bonus round are already emerging.
After last year’s decision to scrap performance bonuses and replace them with retention bonuses for a select few, Deutsche has long been assuring employees that compensation will return to “normal” in 2018. As we reported earlier, this implies higher base pay rather than bigger bonuses, but the actual size of Deutsche’s pool remains speculative. Deutsche needs to spend €1.3bn more on 2017 bonuses than it did on its 2016 pool in order to get back to its 2015 bonus levels.
In Asia, if bonuses are down anywhere, FX and rates employees could well feel the brunt of any cuts after their unit underperformed last year. “FX and rates revenues in Asia Pacific were significantly lower driven by low volatility and subdued client flow,” states Deutsche’s 2017 earnings report, without providing figures for the region.
Asian equities staff at Deutsche, who are mainly based in Hong Kong, should also expect lower bonuses, says a source with knowledge of the bank. Driven by bonus cuts, equities compensation is expected to fall by 7% year on year for 2017 at banks in Hong Kong, but Deutsche could fare worse than most of its rivals, he adds.
“Deutsche’s just made a big loss, so people there don’t deserve a big payout – the shareholders won’t stand for it,” says the source. “More specifically, in Asian equities, it’s underperforming in an area where European banks have been struggling recently. Standard Chartered and Barclays have already pulled out of Asia. Like Credit Suisse, Deutsche has flaws in its equities business here, and MiFID II isn’t doing it any favours either.”
By contrast, Deutsche’s 2017 performance in Asian private banking was encouraging. Fourth quarter 2017 revenues for Deutsche Bank Wealth Management were up 14% globally year on year, partly driven by “continued good growth momentum in Germany and Asia Pacific”. DBWM added about 50 client-facing roles in Asia during the second half of 2017 and – as we reported last month – its recruitment drive is continuing into this year.
Will Deutsche’s relationship managers in Singapore and Hong Kong secure good bonuses on the back of their strong 2017? Not all of them will, says former Merrill Lynch private banker Rahul Sen, now head of wealth management at search firm The Omerta Group. “The top-performing RMs will be kept happy. But the bank’s overall losses will shrink the bonus for sure in Asian wealth management.”
Image credit: ArtyAlison, Getty