Frankfurt Deutsche Bank intends to distribute eight billion euros to shareholders by 2025, CEO Christian Sewing promised when presenting the strategy. But the shareholders are not the only ones who benefit.
The progress made in the restructuring of the group is already causing the earnings of the employees to rise significantly. More profit, more bonuses: The better business results in the past year are paying off for many employees at Deutsche Bank. The sum of performance-related variable remuneration rose by 13 percent to 2.1 billion euros in 2021, according to the bank’s annual report published on Friday.
At the same time, the institute’s retention and new hire bonuses have halved to 135 million euros. In total, the bonuses paid increased by only four percent to 2.2 billion euros.
In the past, the level of variable compensation had regularly drawn much criticism from the public and shareholders, as the bank made little money and paid little or no dividends as a result of its transformation. Even the bank supervisors of the European Central Bank had debated the size of the bonuses with the bank.
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In 2022, however, the institute made significantly more money again. In addition, the bank has now presented plans on how quickly and how it intends to distribute eight billion euros in the form of dividends or share buybacks over the next three years. That could appease critics.
Despite the overall higher bonuses, the bank has paid less salary overall due to the continued downsizing. Total remuneration fell from 10.1 billion to 9.9 billion euros. The average per capita salary of 119,500 euros per year hardly changed.
The number of income millionaires has fallen again after a significant increase in the previous year – this applies at least to the employees whose income the bank publishes. As of this year, this only applies to “material risk takers” who have a major impact on the bank’s risk profile. Last year there were “only” 520 employees among the risk takers who earned seven figures. In the previous year there were still 614 income millionaires among the risk takers of the bank.
“This reduction is primarily due to a lower number of retention bonuses and severance payments granted,” the institute said. However, the top earners who are not risk takers are missing from the figures for the top earners. Last year, this applied to at least 70 people.
The bank declined to provide information as to why it is no longer reporting on all of its top earners. In financial circles it was said that the institute was adapting to the practices of European competitors.
Compared to its European competitors, Deutsche Bank has an unusually high number of millionaires. The big US houses don’t have to provide such detailed information about the income of their employees.
Most of the top earners are in the investment bank – and even more in the capital release unit – as calculations by the Handelsblatt show. At around EUR 374,500 per year, the average earnings of the wind-down bankers exceeded the per capita salary of the investment bankers, which was around EUR 307,600.
The average salary of these top earners is three times the average per capita earnings of the bank, which is around 119,500 euros a year.
The asset managers at Deutsche Bank are far behind this clientele, but are still paid above average. Their average per capita salaries were 187,100 euros.
The employees in the private customer division earn the least. Especially in the branches, many employees are paid according to collective bargaining agreements.
The board of directors, who had given up a twelfth of their annual salary last year, also earned better again last year. The total remuneration of top management increased from a total of 47.3 million euros to 66.5 million euros. However, this information is distorted by a number of points.
On the one hand, there were several changes on the board: Rebecca Short only joined the board in May 2021, Frank Kuhnke left the board last May. There were also changes in 2020. Legal Director Stefan Simon and Asia Director Alexander von zur Mühlen only joined the executive committee in August.
If you factor out all these factors, the salaries of the board members who have been in office since 2020 have still risen by around 14 percent according to Handelsblatt calculations. This value is obtained when the salaries of Simon and von zur Mühlen, which were only paid from August, are extrapolated for the year as a whole and the board members’ waiver of a monthly salary in 2020 is deducted. The remuneration of Short, who has only been on the board since 2021, is not taken into account.
The status of board members on the supervisory board can often be guessed at by looking at the personal degree of target achievement. The undisputed leader when looking at this ranking is CEO Sewing with 142 percent. His deputy Karl von Rohr and CFO James von Moltke follow at a considerable distance in second place with 136 percent. Far behind in last place is Frank Kuhnke, who left the Executive Board last year, with 116 percent.
Beware of cyber risks
In terms of risks, the focus of the annual report is on Russia and the war in Ukraine. A few days ago, the bank had already put its net credit exposure in Russia at a comparatively low 0.6 billion euros. However, the institute acknowledges that the economic fallout from the war “could affect our ability to meet our financial goals.”
The crisis has the potential to push up already high energy prices in Europe, which could lead to an economic slowdown and thus higher losses, including higher loan defaults. On Thursday, the bank presented its new goals for the next three years and promised a return on equity of more than ten percent by 2025.
In addition, the financial institution warned in the annual report of the possible consequences of cyber attacks and the risks of implementing the sanctions imposed by the West, including possible Russian countermeasures. The bank is dealing with an “unprecedented number of sanctions measures that are not fully coordinated in all countries and therefore further increase operational complexity and the risk of errors in the processing of day-to-day business”.
In 2008, Deutsche Bank had to pay $258 million for violating US sanctions. At that time, the US authorities sent an external watchdog to the bank to monitor compliance with the sanctions laws.
The bank’s legal risks have decreased somewhat overall since 2020. For litigation risks that are likely to result in a financial burden, the bank continued to set aside provisions of 1.1 billion in 2021. In addition, there are 1.8 billion euros for litigation risks, which can be reliably estimated but whose occurrence is rather unlikely. In 2020, this sum was still 2.3 billion euros.
More: Deutsche Bank wants to distribute eight billion euros to shareholders by 2025