The big unspoken problem at Deutsche Bank
Would you join Deutsche Bank now? We're just asking in light of the German bank's share price, which is down 53% this year and now stands at lows last seen in the mid-1980s. Headhunters point out that this will not inspire people to go and work for the German bank in the near future.
"It's about to turn into a huge problem for them," says one rates headhunter in London. "Deutsche haven't had any problems hiring so far, but this is going to change. You won't join Deutsche Bank now if that means having your stock bought out and converted into Deutsche stock, and that's going to make it impossible for them to recruit anyone good."
Ever since Deutsche Bank CEO John Cryan spoke of a "hiring frost" back in May, the assumption has been that Deutsche isn't hiring. However, headhunters say this is inaccurate: the German bank reputedly has mandates out across all areas of the investment bank and is rumoured to have recruited Nick Taylor, the former head of credit trading for central and Eastern Europe at BNP Paribas in London. When Cryan announced his Strategy 2020 in October 2015, he said the bank wanted to add 2,000 people across equity capital markets, M&A, credit solutions, prime brokerage and control functions.
Today's fall in Deutsche's share price comes after German Chancellor Angela Merkel indicated that she'd be unwilling to provide state aid to Deutsche Bank ahead of German elections in September 2017. Questions have been raised about Deutsche's ability to raise its tier one capital ratio to the required level following claims at the U.S. Department of Justice will be levying an $14bn fine on the German bank for the alleged mis-sale of mortgage backed securities between 2005 and 2007. In the event that the fine is cut to a more manageable level (put at around $4bn by J.P. Morgan), Deutsche's share price could yet rebound.
While Deutsche's plummeting share price has halved the deferred bonuses of its current bankers, senior staff who worked for the German bank at the time the mortgages were allegedly mis-sold were paid handsomely for their efforts.
In 2005 and 2007, Deutsche's corporate and investment bank generated a return on equity of 30% and 25% respectively. Regulatory filings show that Anshu Jain, who was head of the global markets division at that time, made €14m selling Deutsche shares in 2005 and another €11m in 2006 - in addition to his unspecified cash bonus and salary. Troy Dixon, who arrived at Deutsche Bank in 2006 and went on to become head of the German bank's residential mortgage backed trading desk, is now managing director at Hollis Park Partners, a structured credit hedge fund. Richard D'Albert, who was appointed global head of Deutsche's structured credit group in 2006 is now CIO of hedge fund Seer Capital Management. And Rajeev Misra, Deutsche's then-head of fixed income trading, currently has a cushy number as head of strategic finance at Softbank.