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People familiar with the matter reported that Europe’s largest investment bank Deutsche Bank AG is seeking alternatives to paying bonuses in cash as Chief Executive Officer John Cryan is searching the ways to increase capital buffers and strengthen investor confidence, according to people familiar with the matter.
People who asked to stay anonymous disclosed that executives at Deutsche have held an informal discussion on the alternative options to cash bonuses. Amongst the ideas was giving some bankers shares in the non-core unit. Another option was substituting the cash component with more Deutsche Bank stock.
Andreas Plaesier, the analyst at MM Warburg in Hamburg holding the stock rating, has commented on the matter: “This is something they can try, but they would probably have to expect some resistance from staff. Still, it can be a good way to bind employees to the company.”
Another important matter at hand for Deutsche is the possibility of a full integration of its Deutsche Postbank unit, which had been earmarked for sale.
A spokesman for Deutsche Bank declined to give any comments on the matter.
The bank’s annual report suggests that Deutsche Bank awarded its personnel 2.4 billion euros of bonuses for 2015, 1.45 billion euros of which was for the combined investment banking and trading unit.
Of the 2.4 billion euros, 49% constituted deferred stock and cash while the remainder was paid out straight away.
The founder of New York-based compensation consultancy Johnson Associates Alan Johnson said that the bank risks kindling staff anger if it forgoes cash incentives entirely.
If the board sets this course, it should at least continue paying cash bonuses to junior staff and come up with something creative for senior bankers that could drastically 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.”
Since its inception in 2012 to 27.4 billion euros at the end of June, Deutsche Bank has trimmed its non-core operations, cutting the risk-weighted assets of the unit by 80%.
Cryan’s boosted plan to shut down the unit and set a goal in October last year of cutting the RWAs to less than 10 billion euros by the end of 2016. Upon its inception, the majority of the unit’s assets stemmed from Deutsche Bank’s securities division.
When asked whether Deutsche would slash bonuses for the executive board for a second year, Cryan told Germany’s Bild newspaper last month that “nobody has unrealistic expectations.”