Deutsche Bank MDs mad new hires, paid in stock, board pay $62 million

Deutsche Bank has been splashing out on new hires and paying out a big bonus to the board, infuriating veterans who saw their pay slump.

Deutsche Bank's bosses may face shareholder wrath ahead of a key annual meeting on Thursday.

Senior staff are forced to hold the stock as part of their pay. The shares reached record lows this week.

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Grumbling about pay is nothing new — during bonus season it's practically an annual tradition among bankers. But this year, bonus time at Deutsche Bank had an extra sting.

Deutsche Bank has been splashing out on big new hires while giving a massive pay bump to the board, all while the stock is plunging to record lows. It's causing fury among veteran managers who saw their pay slump.

Staff saw their bonuses slump 14% from the year before, senior staff are saying, a source told Business Insider. Yet the 13-member management board got a whopping 87% pay bump, its first in four years, totaling €55.7 million ($62 million).

The bank's chairman is under fire, and may even reportedly face a no-confidence vote at a key annual meeting on Thursday.

Another factor fueling fury among the older hands are new hires at the bank, our source said.

“People are always jealous of the new guys that come in on big salaries,” the person said.

Deutsche Bank's slumping stock price — down almost 40% in the last year and hitting record lows this week — is another big issue. Staff packages for “material risk takers” at the bank include a fixed amount of deferred stock, meaning they can't cash it out right away. In Deutsche Bank's case, that means for some employees, 25% of their total pay is tracking the shares lower and lower with each new failed deal or money-laundering scandal.

“They're calling it Monopoly money or Mickey Mouse money,” the source said of managing directors in Europe complaining about their pay. “They would never willingly buy the stock.”

Splashing out on big hires

Deutsche Bank has been hiring. Edvin Petersson, who left Deutsche Bank to become an MD at Barclays, is returning to the German bank to head the debt sales business in northern Europe. Elena Isaico is also returning to her former employer to run emerging-market sales after a stint as an MD at Barclays.

Deutsche Bank also hired Kevin Burke, formerly at Standard Chartered, to lead its Asia Pacific institutional and Treasury units.

The German bank reportedly has a reputation for paying to keep stars who try to leave. The website eFinancialCareers said back in 2018 that headhunters trying to poach from Deutsche Bank have faced counter buybacks of up to 50% or more from the bank.

And if they do leave？

“I'm sure they had to pay a premium to get these guys to come back,” the person told Business Insider.

€250,000 extra pay per month

A particular sore point: The bank revealed in March that investment banking chief Garth Ritchie has been pocketing an extra €250,000 ($279,000) per month since December 2017, to handle the “additional responsibility” of Brexit. That salary bump will continue until November 2020.

“A stipend for managing Brexit, as if that's not included in the day-to-day job,” the person cited senior staff as saying.

The bank outlined its reasoning for the board's bonus in its annual report, saying it was deserved because the bank reported its first net profit since 2014:

Rewarding mediocrity

“Since the Management Board had not received any variable compensation for financial years 2015, 2016 and 2017, we are granting the Management Board members the variable compensation that results from the achievement of their respective targets,” Deutsche Bank said.

“They're rewarding mediocrity,” the person said senior staff are saying.

The bonus pool for the rest of the staff shrank in 2018, down 14% to €1.9 billion ($2.1 billion), though CNBC cited Deutsche Bank as saying that was “partly as a result of a reduction in headcount.”

Some of Deutsche Bank's star employees have been poached by other banks. Deutsche Bank this month lost Thomas Konig, reportedly dubbed the “King of Nordic”, to Goldman Sachs' asset management division.

A Deutsche Bank spokesman declined to comment beyond the disclosures in the 2018 annual report.