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In an effort to counter revenue slump, Frankfurt-based Deutsche Bank AG (DB - Analyst Report) is contemplating on trimming roughly 20% of bonuses in the bank’s investment banking division in Europe for 2012. Though the plans are in the primary stage, the company is anticipated to declare its final decision by the end of this month.
The reduction in bonuses may take place in the range of 10%–20% on an average in Europe, Middle East and Africa. However, locations that achieved healthy results will have much lower bonus cuts.
Earlier in September 2012, the bank altered the compensation practices of the top management. The new policies included the chief executives of the company having their bonuses paid after five years, instead of the previous practice of part-payment over a span of three years.
Notably, in the same month, Deutsche Bank announced its restructuring plans, which followed a 100-day evaluation made by the new co-CEOs – Juergen Fitschen and Anshu Jain. Deutsche Bank’s revamp plan involves change in compensation practices, job cuts as well as assets sales. The company intends to bring down annual costs by €4.5 billion ($5.8 billion) by 2015 and slash more than 1900 jobs, mainly in the investment banking division.
Hurt by the Eurozone debt crisis, Deutsche Bank experienced trading revenue declines in the past. Further, stringent regulatory guidelines along with the weak euro have compounded the woes. The company has adopted several strategic initiatives such as repositioning its core business and bolstering its capital levels along with expense management to counter these issues.
London-based Barclays PLC (BCS - Snapshot Report) is also anticipated to slash bonuses for investment bankers for 2012 by roughly 20%. The company is taking this step in an effort to strengthen its profit levels. The bonus details are anticipated to be announced early February this year.
Deutsche Bank currently retains a Zacks Rank #4 (Sell).