PRESIDENT BARACK Obama’s sweeping restrictions on pay at US banks could push their best staff to defect to overseas rivals, Josef Ackermann, chief executive of Deutsche Bank, Germany’s biggest bank, predicted yesterday.
“Talent will be happy to work for us. At the end of the day this is a people business . . . about who has the best talent,” Mr Ackermann said.
The $500,000 cap on executive pay at US banks which accept large tranches of state aid would deter top talent, he argued in comments that will add fuel to the debate over the curbs.
Mr Ackermann and other Deutsche executives have foregone bonuses for 2008 after the bank’s €3.9 billion loss, its largest in 50 years. But it has not received government funds. Mr Ackermann’s comments came as he defended Deutsche’s ability to remain a “broadly diversified investment bank” in spite of a torrent of trading losses during the last three months of 2008. Its corporate banking and securities division – the heart of its trading and investment banking operations – lost €5.8 billion before tax in the last three months of 2008.
But Mr Ackermann, who is to step down next year, said Deutsche would emerge successfully from the crisis after cutting some of its riskiest businesses, including proprietary trading, which has been reduced by 75 per cent.
“We have taken drastic measures . . . but we are maintaining our flexibility,” he said. “We are convinced trust will return to the markets . . . banks profiting from this will be the few independent investment banks that have handled the crisis without external assistance and have positioned themselves sustainably.”
Revenues last month were €2.8 billion, above last year’s figure for January and slightly under the record result in 2007.
Deutsche said it had cut its leverage ratio, a key concern over recent months as analysts pointed to its relatively slim capital cushion. Tier one ratio, a measure of its balance sheet strength, was above target at 10.1 per cent. Core tier one, excluding hybrid capital, was 7 per cent compared with 7.5 per cent three months earlier.
"The bank pulled all strings to keep its tier one capital at levels away from regulatory scrutiny," said Dirk Hoffmann-Becking, at Bernstein Research. "The company is running out of 'tricks' and hence could not sustain a loss as seen in the fourth quarter again without seeking further capital." – ( Financial Timesservice)
