Now that earnings season is over, there is a plethora of information to digest. In the world of investment banking, compensation levels always exists near the top of the list.
Following this quarter’s disclosures, an interesting change has been observed: Deutsche Bank’s (NYSE: DB) investment bankers earned an average of $398,100 in the first nine months of 2010, surpassing the $370,700 average earned at investment banking powerhouse Goldman Sachs (NYSE: GS).
Deutsche Bank’s Chief Financial Officer Stefan Krause told analysts on a conference call after the bank published third-quarter results that “Top talent has its value and price; we cannot ignore that fact.” Political pressure has mounted steadily in the US, and many point to it as a major reason why investment bankers pay across the US Wall Street banks have fallen. Krause commented that if they face increasing political pressure to curb bonuses, the firm could adapt the way it pays key staff. Krause went on to say that it would be difficult for regulators to set an absolute cap on pay, adding “This is not something that you can regulate; this is something that the market will define.”
Goldman Sachs’s 35,400 staff earned $13.12 billion for the same nine months, giving an average of about $370,700, down by almost a third from a year ago. Compensation for Deutsche Bank’s more than 16,000 staff at the corporate and investment bank totaled 1.34 billion Euros for the third quarter, its earnings release shows, bringing the pot to 4.62 billion Euros for the first nine months of the year.
Regulators, central banks, national banks, and the general public have been outraged for the past two years; incredulously watching large salaries and bonuses continue to be paid to employees of banks that received government money. What is missing from this vitriol though is an understanding that there is a market for their services – should a cap be placed on wages of these firms for example, you would immediately see a jettison to unregulated markets around the world, into hedge funds, or alternative businesses. Bank of America (NYSE: BAC), for example, saw significant talent losses during 2009, as the US ‘pay czar’ restricted what employees could be paid.
