World Economy

Deutsche Bank Planning Options to Bonuses

Deutsche Bank Planning Options to BonusesDeutsche Bank Planning Options to Bonuses

Deutsche Bank AG, Europe’s biggest investment bank, is exploring alternatives to paying bonuses in cash as Chief Executive Officer John Cryan seeks to boost capital buffers and shore up investor confidence, according to people familiar with the matter.

Executives at the German lender have informally discussed options including giving some bankers shares in the non-core unit instead of cash bonuses, said the people, who asked not to be identified because the deliberations are private. Another idea under review is replacing the cash component with more Deutsche Bank stock, they said, Bloomberg reported.

The supervisory board may discuss the topic of variable pay at a meeting on Wednesday, the day before the firm is scheduled to report third-quarter earnings, though no final decisions are expected, the people said.

The measures, if pursued in the coming months, would mostly impact the investment bank, the people said. The Frankfurt-based lender is still considering other alternatives, they said. Another likely topic of discussion is a full integration of its Deutsche Postbank unit, which had been earmarked for sale, the people said.

Any decision will probably depend on the size and timing of Deutsche Bank’s settlement with the US Department of Justice over a probe into the sale of faulty real-estate securities.

Cryan, 55, is trying to reverse a slide in shares that eroded more than 40% of the company’s market value this year, amid concerns about the financial hit from mounting legal costs after the Justice Department initially requested $14 billion to settle the probe.

Deutsche Bank awarded staff €2.4 billion ($2.6 billion) of bonuses for 2015, €1.45 billion of which was for the combined investment banking and trading unit, according to the bank’s annual report. Of the €2.4 billion, 49% was deferred stock and cash while the remainder was paid out immediately.

 Leaving Hope

The bank risks angering staff if it abandons cash incentives entirely, said Alan Johnson, founder of New York-based compensation consultancy Johnson Associates Inc. If the board proceeds, it should at least pay cash bonuses to junior staff and structure something creatively for senior bankers that could dramatically increase in value if the bank recovers.

“They’ve got low morale already,” he said. “The best thing would be to limit the number of people it applies to and give them some hope.”

A spokesman for Deutsche Bank declined to comment.

The idea of handing out stakes in the non-core unit echoes a similar move by Credit Suisse Group AG at the height of the financial crisis, when the Swiss firm used its most illiquid loans and bonds to pay employees’ year-end bonuses.

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