Ahead of Deutsche Bank AG’s (NYSE:DB) earnings release tomorrow, Chief Executive Officer’s John Cryan is said to be contemplating options to traditional cash bonuses, part of a strategy to shore up investor confidence and augment existing capital buffers for the lender, per a Bloomberg report.
Deutsche Bank, like many European lenders has been under siege from investor confidence, due in large part to dwindling profit margins and diving revenues in previous quarters. With the German lender slated to report its earnings tomorrow, all eyes will be on the bank following its Q2 earnings that left Cryan executing broader job cuts to help restore profitability.
To date, Deutsche Bank has been one of the most active lenders in terms of personnel moves. It has already embarked on a path that will lead to the loss of upwards of 35,000 jobs from its worldwide operations over the next few years. Faced with weak profits, the bank has gotten creative in looking for ways to generate cash and help buoy investor confidence, culminating in a bonus restructuring.
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Deutsche Bank executives have already entered into discussions, mulling over a series of options that includes giving select bankers shares in the non-core unit rather than traditional cash bonuses. Alternatively, another idea presently being floated is an outright replacement of as a means of a bonus, opting instead for shares of Deutsche Bank stock.
Last year, the German lender allotted staff a total of $2.6 billion in bonuses, with $1.58 billion of which being reserved combined investment banking and trading unit, per a company filing. Of the $2.6 billion total however, nearly 49% was deferred stock and cash while the remainder was paid out on an immediate basis.
It will be interesting to see if Deutsche Bank follows through on the strategy, not unheard of in the banking realm, though unusual for the present. At the height of the global financial crisis, Credit Suisse Group AG utilized used its most illiquid loans and bonds to pay employees’ year-end bonuses.
An upbeat or solid earnings report tomorrow will go a long way towards allaying many of the concerns that is currently shrouding Deutsche Bank.