Deutsche Bank Mulls Axing Bonuses to Pay Loans and Fine

ax-gifDeutsche Bank could ax bonuses for some of its senior staff as scrambles to shore up cash to pay a potentially massive fine over toxic US loans.

The bank, which has spooked investors in recent months with warnings over lower for longer interest rates and red tape pushing up costs, will not make a decision on its bonuses until early next year.

January is also when the bank is expected to reach a settlement with the US Department of Justice over its potential $14bn (£11.5bn) fine for mis-selling mortgage-backed securities containing home loans made to low- income families.

A deal is expected to be reached within the next few weeks, before the inauguration of Donald Trump as US President on 20 January.

Read more: Where did it all go wrong for Deutsche Bank?

Deutsche chief executive John Cryan, who has previously bemoaned his task of repairing the bank, said the attention the fine negotiations had received recently had unfortunately “overshadowed” the progress the bank was making on restructuring.

In an attempt to cut costs and shore up the balance sheet, Cryan has been making significant efforts to revamp Deutsche’s operations, including the recent sale of Abbey Life to specialist life insurer Phoenix, launching a fintech factory in Frankfurt and making some tough decisions on job cuts.

In October the German lender revealed net income of €278m (£248.2m) for its third quarter, a substantial improvement on the €6bn loss it announced for the same period last year.

ezgif-com-resize-8Last week Deutsche agreed to pay a penalty of $37m to settle investigations by US regulators over how it sent orders to share-trading venues known as dark pools.

Read more: These are the key issues facing Deutsche Bank right now

Deutsche is the third European bank to agree to pay a fine relating to how they policed their stock-trading dark pool platforms, taking the combined bill to $191m in penalties this year.

In January, Credit Suisse and Barclays agreed to pay about $85m and $70m respectively to resolve claims that they repeatedly failed to police their trading venues.

ezgif-com-resize-10A snapshot: Deutsche Bank‘s annus horribilis

July 2015: British John Cryan takes over the reins as CEO at Deutsche Bank

August 2015: Shares look relatively healthy, trading at €31 and the prospect of interest rate rises in both the US and the UK are on the cards

September 2015 : Reports suggest Deutsche Bank will withdraw from Russia and announce 23,000 lay-offs, equivalent to one-quarter of its workforce

October 2015: Dividend scrapped, 10 countries quit, at least 15,000 jobs lost at Deutsche Bank shocks the markets with a €6bn loss for the third quarter. Stock price hits €25.

November 2015: Fined more than $250m by US regulators for violating sanctions (76)ember 2015: US Federal Reserve hikes interest rates – a rare piece of good news for the banking sector – as Deutsche Bank eases back from China

January 2016: Full-year losses reported at €6.8bn for 2015. Shares slump to lowest ever level of around €13.

February 2016: Turmoil on the global markets hits banks worst than most as shares plumb new record lows.

Billy Bambrough

Billy Bambrough is City A.M.’s deputy news editor.

Source: CityA.M.

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