Finance

Deutsche Bank hikes pay for senior investment bankers by 63% as bonus pool swells

Deutsche Bank hiked bonuses for some of its top investment bankers by more than 60% as the German lender followed rivals by paying top performers in the division after a bumper year.

The bonus pool within the German lender’s investment bank as a whole increased by 46% to €875m, according to its annual report, after the unit helped prop up group profits in 2020 as trading revenues offset the impact of the Covid-19 crisis on the wider business.

But around 1,000 staff known as material risk takers within Deutsche’s investment bank, which includes managing directors, received a total of €716m in variable compensation last year, an increase of 63% in 2019. MRTs are employees whose actions can influence the risk profile of the bank and a large proportion of pay is deferred over a number of years.

The average bonus payment for this group of employees was around €697,000, an increase of 85% on the same period in 2019. Total pay was €1.2m on average.

Perhaps not surprisingly, the number of people earning more than €1m at Deutsche increased by 17% to 684.

Deutsche Bank is under pressure to pay its traders and investment bankers well after their best performance in years as both advisory and markets functions have surged during the Covid-19 crisis. However, the bank is also in the midst of a cost-cutting programme that will eventually cost 18,000 jobs and has to tread a delicate line, particularly in its home market where retail banking jobs are at risk. Deutsche’s trade union DBV criticised the bank for big bonus payments to traders, while cutting elsewhere Bloomberg reported on 9 March.

READ UBS hikes bonuses by nearly 50% for senior employees after bumper year

Senior staff in investment banking units have generally been paid well, even if pay has been cut elsewhere in the business. At UBS, bonuses for material risk takers surged by 47% from $667m last year, with average bonuses jumping from around $1m to over $1.5m. The bonus pool across the bank increased by 24% to $3.3bn.

Barclays increased average pay for senior employees within the unit housing its investment bank by 14% to £636,000Natwest Markets paid out £58m to 88 senior traders despite cutting the overall bonus pool by a third to £206m.

HSBC, however, reduced compensation for top staff in its investment bank by 11%, with average payments coming in at $559,000.

Overall, the bonus pool for the German lender’s nearly 85,000 employees rose by nearly 29% to €1.85bn. Deutsche Bank reportedly planned on hiking the bonus pool to €2bn, but reduced it under pressure from the European Central Bank.

Its chief executive Christian Sewing received around €7.4m in total compensation last year, which was up by 46% on 2019.

READ Barclays increases bonus payments for senior staff in investment bank

Sewing has repeatedly said that the bank will pay for performance, particularly within its investment bank where performance surged last year. Revenues of €9.3bn were up by 32% on 2019, with pre-tax profits going from €502m to €3.2bn in the unit. Deutsche’s fixed income division was the main driver, accounting for 76% of revenues within its investment bank, increasing by 28% to €7.1bn.

Sewing said that the bank would pay bonuses in line with competitors. “We are facing global competition. Of course, we have to compensate our employees in line with the competitive situation,” he told journalists during its annual media conference in February. “If you’re operating on a global scale, you’ve got to keep your eye on your competitors.”

To contact the author of this story with feedback or news, email Paul Clarke

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