Deutsche Bank U.S. staff said to get major share of bonuses

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Deutsche Bank employees in the U.S. received the lion's share of bonuses as the lender sought to retain top performers following cuts to the investment bank there.

The total amount set aside for 2018 fell to 1.9 billion euros ($2.2 billion) from 2.2 billion euros a year earlier, Deutsche Bank said Friday. The bulk went to the U.S., which suffered some of the deepest headcount reductions, according to a person familiar with the matter. Top management including Chief Executive Officer Christian Sewing received their first bonuses in four years after returning the bank to a small profit.

Sewing has accelerated cost reductions, particularly in U.S. investment banking, after multiple failed turnaround efforts. Shortly after taking over a year ago, he announced deep cuts to U.S. rates sales and trading, reductions to the corporate finance business in the U.S. and Asia, and a review of the global equities business. Last weekend, the bank said it was exploring a merger with rival Commerzbank, in an admission that the measures so far have failed to restore investor confidence.

Sewing has repeatedly said that the bank remains committed to its presence in the U.S. That's even though some large shareholders have urged deeper cuts, people familiar have said. The investment bank unit in the country is struggling with profitability, with the equities portion not having made a profit in many years, people familiar have said. The situation is compounded by regulatory scrutiny after the lender last year failed a stress test.

Still, the cuts last year helped return the bank to profit, after three straight years of losses that forced management to forgo bonuses. This year's payout is the first in their current roles for eight of the nine board members. Chief Risk Officer Stuart Lewis is the only one on the board who was in the same position when former CEO John Cryan's team decided to waive their bonuses from 2015 and 2017.

The highest earning member of the management board is investment bank head Garth Ritchie, who received a monthly "functional allowance" of 250,000 euros to compensate him for his Brexit-related work for the bank. That's on top of his fixed and variable pay, resulting in total compensation of 8.6 million euros. CEO Sewing got 7 million euros.

Paul Achleitner, who has overseen much of the bank's recent decline as chairman, received 858,000 euros in fixed compensation, an increase of 7.3 percent.

Deutsche Bank granted a total of 26.5 million euros in severance pay and compensation for non-compete clauses to the management board members who left last year. Ex-CEO John Cryan, ousted by Achleitner last year in a chaotic power struggle, was granted 9.9 million euros.

His successor Sewing on Friday pledged to reverse years of declining revenue while cautioning that the market environment so far is weaker than it had anticipated. Revenue in 2019 should be "slightly" higher than last year, assuming "solid" economic growth. The bank maintained a profitability target for this year but said that goal remains dependent on how markets develop.

Deutsche Bank's bonus pool has been declining almost without interruption since at least 2010 as the as it seeks to lower expenses and comply with stringent European Union rules on executive pay. Employee commitment — an indicator reflecting staff's loyalty to the bank based on an annual survey — stayed at a record low 57 percent.

Deep as the cuts are to the overall pool, Deutsche Bank's bonus reduction isn't the biggest among European banks. ING Group NV recently slashed variable pay at the group by a quarter after it faced a money-laundering scandal last year.

Deutsche Bank employees received notification about their individual bonuses in early March, with many facing deep cuts and some getting nothing, people familiar with the matter have said. Others saw their variable pay rise, however, as the bank makes more selective payouts in an attempt to keep top earners, the people have said.

Bloomberg News