Deutsche Bank AG, the biggest bank in continental Europe, may consider increasing the salaries of management board members and senior staff to remain competitive after the European Union moved to cap bonuses.
Deutsche Bank needs to pay its most senior staff enough in fixed renumeration to compete with firms that aren’t affected by EU regulations, Juergen Hambrecht, who led an external panel that reviewed salaries at the lender, told reporters in Frankfurt today.
Paul Achleitner, chairman of Deutsche Bank’s supervisory board, said he won’t speculate on what action the bank will take as the bonus limits haven’t been enforced. The firm, which cut boardroom pay in 2012, has to take into account what rivals do and doesn’t want to lose a competitive edge, he said.
European leaders are toughening bonus and capital rules to help prevent a repeat of the taxpayer-funded bailout of banks after the 2008 collapse of Lehman Brothers Holdings Inc. Under a draft EU deal struck last month, bankers will be banned from receiving discretionary pay worth more than twice base salary, with special treatment applied to parts of the bonus that are deferred for at least five years.
“We’re having this discussion because variable pay in the industry exploded in the last 20 years,” Achleitner said. “But we shouldn’t forget careful business principles and force banks into a position where their fixed costs increase.”
Companies on Germany’s benchmark DAX index pay management board members bonuses that average six times base salary, Hambrecht said.
“In the end, they’ll probably have to pay higher salaries to sure-fire earners while trying to avoid that with employees in more cyclical areas,” Dirk Becker, an analyst with Kepler Capital Markets in Frankfurt who recommends investors buy the stock, said today by phone. “Deutsche Bank will try everything not to fall into the trap of sitting on massive salaries they have to pay out even if the market turns for the worse.”
Co-Chief Executive Officer Anshu Jain’s bonus of 8.6 million euros ($11.1 million) for 2011, when he was head of the investment bank, was more than seven times his 1.15 million-euro salary, according to company filings. Former CEO Josef Ackermann’s 2011 bonus of 7.7 million euros was almost five times his 1.65 million-euro salary.
Jain and co-CEO and Juergen Fitschen were paid 4.8 million euros each in total compensation last year, Achleitner said, without providing a breakdown. The bonuses of the two co-CEOs will be paid primarily in stock, according to the bank.
The management board’s total pay last year fell 34 percent to 26.3 million euros. Net income in 2012 slumped to 237 million euros from 4.13 billion euros after writedowns in investment banking and costs associated with building capital and job cuts.
Deutsche Bank applied some of the external panel’s recommendations in its 2012 compensation system and will continue introducing them, said Stephan Leithner, responsible for personnel and compliance at the company.