While everyone frets over Deutsche's coming redundancies, the German bank has quietly divulged how and how much it paid its bankers last year. After a quick perusal of its remuneration report, we would like to suggest that you don't want to be a top managing director at Deutsche Bank. However, there are a few advantages to getting in with Anshu Jain.
This is what you need to know:
Deutsche's 'cliff vesting' bonuses live on. In theory the deferral period for its top bankers is only 4.5 years, but there's another six month 'retention period' on top of that. Fortunately, this only applies to the 133 most senior managers.
Deutsche Bank has 1,295 material risk takers in total. These are the people affected by the European Union's strict compensation rules and are typically senior managers, traders, and high earners. However, only 560 of Deutsche's material risk takers are in the European Union. 735 of them are therefore located in New York, Hong Kong and elsewhere (and are affected by the EU's compensation rules nonetheless).
The European Union has capped bonuses at 200% of pay (or 250% in some circumstances). Deutsche Bank needs to adjust its compensation structure to take account of this: in 2013, bonuses in its investment bank were 3.25 times higher than salaries. Despite this, Deutsche makes no reference to the sorts of monthly or annual 'allowances' that other banks are using to get around the cap. We therefore conclude that it plans to hike salaries sometime soon...
Deutsche Bank only deferred the pay of 4,700 people across the bank last year. According to its third quarter results for 2013, Deutsche had 8,577 front office bankers in its investment bank. This implies that no more than 55% of its front office investment bankers had their pay deferred. That's pretty low.
Elsewhere, Deutsche says that it doesn't defer any pay below €100k (£84k, $138k). From this we conclude that 55% of Deutsche's front office investment bankers and traders are probably earning €100k or less. So bankers aren't all earning six figures after all.
This was a lot less than UBS, which paid its average regulated employee $2.2m last year.
The German bank paid 28 people an average of €964k each in sign-ons last year. The UK Financial Conduct Authority restricts sign-on bonuses, so we suspect these were mostly paid in New York and Asia.
Even though it seems that a lot of Deutsche's front office bankers earn less than €100k, the German bank is theoretically prepared to pay a lot more than that. At most, it will pay €300k of unrestricted cash in any one year.
If Deutsche as a whole makes a loss (as measured in net income before tax), 100% of the bonuses due to vest in a certain year and 20% of the five-year cliff vesting bonuses of MDs, will not be paid. This will also happen if a business division makes a loss. Long-term performance awards will be clawed back in full if Deutsche's returns don't meet 60% of the peer group's average.
The good news is that Deutsche's clawbacks only extend over a 3.5 year period. The Bank of England has plans for six-year clawbacks in future.
If you have the misfortune to be a regulated employee, Deutsche will pay 50% of your (theoretically) non-deferred bonus in the form of an 'equity upfront award'. This is stock which has already vested. However, don't assume you can sell this stock immediately for cash. Even though it's not deferred, the equity upfront award comes with a six month retention period. Deutsche would like to point out that it's going above and beyond regulatory requirements by imposing this restriction...