Staff will receive as much as 100,000 euros in cash and 100,000 euros in stock they won’t be able to sell before August, the people said, declining to be identified because the talks are private. Any further bonus will be deferred over three years, they said. The limit will apply to employees across the company, including the investment bank, one of the people said.
Morgan Stanley, Credit Suisse Group AG and Citigroup Inc. (C) have all reduced senior investment bankers’ pay for last year as revenue slows. Morgan Stanley (MS) is capping immediate cash bonuses at $125,000, people with knowledge of the move said last month.
“The generic ‘war for talent’ is over,” said John Purcell, founder of London-based recruiter Purcell & Co. “Of course, top performers will always be in demand, but the rising tide that lifted all boats has well and truly gone out. The recent, current and forthcoming redundancies have fundamentally altered the economics of remuneration in banking.”
Christoph Blumenthal, a spokesman for Frankfurt-based Deutsche Bank, declined to comment on the bonus cap. The lender said last week profit fell 76 percent in the fourth quarter as Europe’s sovereign-debt crisis curbed income from trading. Employees were informed this week about their individual pay, the people said.
“This fits the current investment banking environment,” said Christian Hamann, an analyst at Hamburger Sparkasse, who rates the stock a “hold.” “This is one of the few levers you can deploy apart from cutting jobs” to cut costs, he said.
The bank said last week it cut pay for employees at the corporate and investment bank by 15 percent in 2011 after income at the division plunged. Deutsche Bank set aside 5.05 billion euros for compensation and benefits, compared with 5.91 billion euros in 2010, according to company filings. That was enough to pay an average of 332,785 euros to the 15,184 employees at the division, which includes transaction banking.
Financial firms worldwide are facing public and political pressure to limit bankers’ compensation after taxpayers were forced to bail out the industry during the financial crisis. Deutsche Bank, which didn’t require direct state aid, announced 500 job cuts at the investment bank in October to reduce costs as tougher regulation weighs on profitability. Chief Executive Officer Josef Ackermann said Feb. 2 that 61 percent of total compensation at the bank will be deferred.
Bank of America Corp. is also freezing base salary levels and limiting cash bonuses to $150,000 for some investment bankers, people with knowledge of the moves said in January. The cap on cash payments applies to those getting as much as $1 million in total year-end bonuses, with the rest coming in shares of the Charlotte, North Carolina-based lender.
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