Credit Traders Leave Over Pay Cuts
Shares in Deutsche Bank are trading 1% lower pre-market on Monday as the market reacts to news of further exoduses from the company’s esteemed credit trading group.
Deutsche Bank has suffered a steady stream of losses among employees following its announcement last year that it would be cutting 18000 jobs. The company highlighted plans to cut jobs and liquidate its stock trading business in a bid to plug large losses.
Along with the job cuts, Deutsche Bank has also been scaling back salaries. This includes those within its credit trading group whose members, often referred to as “rockstars” secure some of the highest salaries within the bank.
In light of the reductions in pay, an increasing number of traders have been leaving the company to go elsewhere. This is particularly challenging for Deutsche Bank given that credit markets are seeing some of their highest volatility in a decade.
Movements in the credit market have helped some of Deutsche Bank’s competitors secure record-breaking fixed income returns. However, due to the exodus of talent from the company, Deutsche Bank has been unable to obtain similar results.
Deutsche Bank Fined Over Epstein Involvement
This is the latest in a series of bad news regarding Deutsche Bank recently. The bank was hit with a $150 million fine this month over its dealings with billionaire pedophile Jefferey Epstein. New York State regulators said that Deutsche Bank had shown “significant compliance failures” in its dealings with Epstein which included payments of over $800,000 to Russian models as well as many “suspicious” cash withdrawals.
In a statement released in response to the fine Deutsche Bank said:
“We acknowledge our error of onboarding Epstein in 2013 and the weaknesses in our processes and have learned from our mistakes and shortcomings. “Our reputation is our most valuable asset and we deeply regret our association with Epstein.”
New York’s Department of Financial Services claimed the bank helped Epstein transfer over $7m in a five year period. This included over $2.6 million in payments to women described as rent tuition and other payments.
The regulator said:
“Whether or to what extent those payments or that cash was used by Mr. Epstein to cover up old crimes, to facilitate new ones, or for some other purpose are questions that must be left to the criminal authorities, but the fact that they were suspicious should have been obvious to bank personnel at various levels.”
Deutsche Bank is due to report earnings on July 29th. The consensus forecast is for earnings per share of -0.07. In Q1 Deutsche Bank reported slightly better than expected earnings of 0.02 versus -0.04 expected.
10.23 Level Holds As Resistance
Deutsche Bank shares had broken out above the bullish channel which has framed the recent recovery. However, it ran into resistance at the 10.23 level and the bearish trend line from year to date highs.
While the 8.98 level holds as support, focus is on a continued grind higher. Bulls will be looking for an eventual break above the 10.23 level.