“I think we’ve actually been erring slightly on the generous side” when awarding bonuses for 2017, Cryan said in an interview with Bloomberg TV Friday. “We took a risk last year” by slashing variable compensation almost 80 percent. Now, “we’re talking about investing for the future.”
In 2016, DB cut the bonus pool by 80%, and they are now increasing it by 2.4x in 2017. (1-0.8)*2.4 = 48%.
So, to DB, generosity means paying 50% of market variable compensation. Protip: DB isn’t making money because no one wants to work there.
Their CDS has spiked and their debt has been downgraded.
They are on the US watchlist for troubled financial institutions.
All employees are running for the doors. By the way, deferred bonuses there have apparently been held in company stock. So even past compensation earned by DB’s employees has been destroyed.
Like his predecessor, Mr. Sewing’s incompetence and indecision has continued to destroy his company’s value by demoralizing his workforce and casting uncertainty on the future of DB’s businesses. He is a failure as a leader and does not belong at the head of this historic institution.
“ohai, why do you hate DB so much” you might ask. Well, I don’t really. In fact, given that I work at a competing institution, this arguably benefits me. It is just alarming to see such obvious mismanagement at (what used to be) such an important investment bank. Anyone who works in the industry and did not see this disaster coming is a fool.
The genesis of these problems predated the wage cuts and Sewing who’s been CEO for all of not even two months, if anything Cryan gets more blame taking over with shares at $29 and leaving with them at $14. Although I’d argue a lot of this goes back to at least the Euro Crisis. Plus, it’s sort of an alphabet soup of problems over there and a not insignificant portion is tied to the broader low rate / depressed Euro environment. The only European banks that have been relatively unscathed are the entirely globalized ones (UBS, BNP, HSBC, etc) and DB has always sort of straddled the line with a higher proportion of continental European exposure than the truly global European peer group. I think the Italy thing also gets a mention here.
There are deep roots of this problem that predate Sewing. However, the new CEO has done nothing to improve conditions. On the most basic level, he is not providing leadership for his workforce, only uncertainty. His best employees are leaving for firms that are willing to promise them better security and recognition of value. DB has a serious cultural issue, which I have pointed out many times. Their failure to turn around was easy to predict.
It’s not a matter of global business coverage. DB has at least the same geography or more, compared to CS or UBS. However, these other two, while still struggling, have not failed to DB’s disastrous extent. DB does have some German-specific issues to deal with, but the heart of their problem is hilariously bad management. The 2008 effects were known throughout this whole time. The 5y decline in DB’s stock up to today shows that they have made things worse.
I’m not short anything; have just been long more than my net worth in SPX. I do own one bank stock (other than the company I work for), which has appreciated something like 150%. It’s really true that talent creates value in these companies. When you see the best people going one way, they will bring money soon, and vice versa.