Deutsche Bank would like it to be known that, like Barclays, it has done a lot of hiring. Last week, the German bank issued a press release proclaiming that it had recruited Paul Huchro, a former partner from Goldman Sachs, along with 39 other credit sales and trading staff in Europe and the U.S over the previous 18 months. Impressive. Except…
Except that unlike Barclays, Deutsche Bank isn’t making up for lost time. While Barclays had a two-year hiring freeze under Jes Staley until January 2017, Deutsche Bank only had a four-month hiring freeze under John Cryan. Barclays doesn’t break out headcount figures for its investment bank specifically, but Staley managed to cut 13,600 jobs across the bank in the first nine months of 2016. Deutsche Bank does break out figures for its investment bank and managed only to cut 184 out of 17,100 from front office jobs in its investment bank between 2015 and Q2 2017. With costs in its investment bank stuck at 83% of revenues (compared to 70% at Barclays‘ investment bank), can Deutsche Bank afford to hire? Cryan clearly thinks it can. Others may wonder.
Deutsche Bank’s senior traders and bankers could find themselves in the latter group. Most people above vice president level at Deutsche Bank received no bonus last year and retention packages for high performers are currently so far underwater as to be growing gills. Deutsche Bank has promised to make amends at the next bonus round, but with revenues lacklustre in the second quarter of 2017 and compensation spending per head down 2.5% year-on-year in the first half, compensatory generosity doesn’t seem assured. – And all the more so because Deutsche seems intent on adding to its cost-based with new hires late in the season.
Deutsche didn’t comment for this article, but its VPs and MDs are still bullish about their coming bonuses. “I spoke to management they haven’t received the pot yet but they believe we should be paid like a normal year,” said one equities trader, adding that, “To be honest I hope a little bit more since what happened last year.” A Deutsche investment banker said there hadn’t been any formal communication that bonuses would be back up this year, but that there was an, “implicit understanding,” with management that they will be, and that “a lot of people will be very upset” if they’re not. Senior fixed income traders are still citing CFO Marcus Schenck’s insistence that this year’s bonus round will be, “back to normal”.
Deutsche doesn’t report its third quarter results until October 26. U.S. banks’ lacklustre performance suggest they may not be pretty, particularly in fixed income trading where all the hiring has happened. With CEO John Cryan under pressure from shareholders, Deutsche may yet find that it’s created a rod for its own back in promising to reward employees well in the next bonus round: the easiest option may well be to pay another round of terrible bonuses to MDs in the hope that they leave of their own accord (thereby saving on severance pay). In the meantime, Deutsche’s senior staff can at least console themselves with the thought that new colleagues like Huchro were out of the market, and won’t come with big bonuses to be bought out.