Earlier today we found out that Deutsche Bank was cutting 1,900 jobs.
And in the next breath, the bank announced that it would be “reviewing compensation practices” — obviously, not to give anyone a fat raise.
The thing is, as CNBC’s Kayla Tausche and Jesse Bergman report, even if Deutsche Bank does nothing to their compensation pool, bankers that receive bonuses are facing a pay cut.
You can blame the euro. According to Tausche and Bergman, Deutsche’s bankers get their bonuses in three parts — cash, stock, and deferred euro-based cash. The bank’s stock is down 35% since February of this year, but to make matters worse the euro is down 9% since February.
So as goes the euro, so goes the Deutsche Bank bonus.
To illustrate: €100,000 bonus (worth $132,000 to a US-based banker in February) would now be worth roughly $111,000 due to respective stock and foreign exchange fluctuations. The harsh reality is that most bankers are playing with numbers much larger than that.
Discussions between senior bankers and management over alternative pay structures are open, people familiar with the discussions said, though any changes are unlikely to be in place by the next pay cycle. Possible options would include allowing individuals to hedge their packages, or hedging the entire compensation pool, these people said.
In short, bonus season is going to be bad any way you slice it.