John Cryan and the hideous news on Deutsche Bank bonuses
We haven't heard much from John Cryan, CEO of Deutsche Bank, in 2017. Maybe he's skiing? Maybe he's detoxing? Maybe he's sitting on a leather sofa in a corner office fanning himself with some headed paper after successfully reducing Deutsche's settlement with the U.S. Department of Justice (D.O.J) from $14bn to $7.2bn? Either way, Cryan's cryonic silence could be about to come to an end.
We have it on good authority that Cryan is about to come out of the deep freeze and announce to Deutsche Bankers that...there will be no cash bonuses this year. Moreover, there will be no new Deutsche stock bonuses that will vest in the next 12 months. 2016 Deutsche Bank bonuses, paid in 2017, will be non-existent.
Deutsche Bank declined to comment. The latest allegations follow reports that Deutsche Bank was being compelled to drain the cash bonus pool as a condition of the D.O.J settlement. However, senior sources at Deutsche tell us this isn't the case.
Even if the D.O.J. isn't forcing Deutsche to do the dirty on this year's bonuses, the bank still has good reason to cut its cash bonuses to the bone (or do away with them altogether). J.P. Morgan's banking analysts say Deutsche Bank will be seriously under-capitalised to the tune of €4.3bn by 2018. Analysts estimate it could raise up to €2.3bn if its cuts cash bonuses, pays its people entirely in newly issued stock, and claws back bonuses from previous years.
Deutsche Bank doesn't announce its fourth quarter results until February 2. In the call accompanying the bank's third quarter results, CFO Marcus Schenck said no decisions had been made on the structure of 2016 bonuses but that the bank would probably err on the side of stock.
Deutsche insiders say Cryan's imminent announcement will indeed involve some stock payments. However, these stock payments will allegedly be offered to less than 20% of Deutsche staff. They'll also be deferred over three years, with the first payment vesting in 2018. Deutsche's managing directors and high earners will be subject to the bank's usual cliff vesting rules and won't get any of this year's deferred stock until 2022 or later.
Will Deutsche staff all tolerate this? Last year there were complaints that the German bank's bonuses were 'the worst ever.' Now it seems DB staff are about to be unpleasantly surprised again. Thankfully, they have their salaries as consolation: Deutsche hiked fixed pay 30% in 2015 and then again last year.