Deutsche Bank Should Slash Bonuses of Staff, Autonomous Says

  • Bank could raise as much as 2.8 billion euros by cutting pay
  • Says top 3,000 staff should get no bonus to preserve capital

Deutsche Bank AG could raise as much as 2.8 billion euros ($3.14 billion) by taking a tougher stance on employee compensation and not giving bonuses to thousands of staff, according to Autonomous Research LLP.

“Being very tough on the 2016 bonus pool and requiring the forfeiture of unvested shares could be helpful,” according a note this week by Autonomous’s London-based Chief Executive Officer Stuart Graham seen by Bloomberg News. “This would also provide a strong signal to long-suffering shareholders, who have stumped up 13.5 billion euros of new equity” since the fourth quarter of 2009, excluding capital raised to buy its German retail unit Postbank.

Deutsche Bank, which houses Europe’s largest investment bank, has struggled to adapt to an era of tougher capital requirements and lagging trading revenue. Since laying out his strategy last October, CEO John Cryan has cut risky assets, eliminated thousands of jobs and suspended dividend payments to preserve capital. However, that’s failed to stem a decline in its share price which has slumped 53 percent this year.

Any move to make staff give up their shares could be subject to legal challenges, Autonomous said, while a zero cash bonus could save Deutsche Bank 800 million euros after tax, the report said.

A less painful alternative would be “zeroing the bonus” for the top 3,000 staff, who in 2015 accounted for some 52 percent of the bonus pool, according to the note. Other options include being more aggressive on clawbacks. Over the 2012 to 2015 period, Deutsche Bank clawed back about 38 million euros of bonuses from staff, Autonomous estimated.

“We see some means by which management could boost the capital via imposing burden sharing on the staff,” Graham said in the note, maintaining an underperform rating on the stock. “The dilemma for management is whether such pain for staff would lead to yet more franchise erosion.”