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Jain Gets Silent Treatment as Bankers Eat Humble Pie

By Nicholas Comfort and Annette Weisbach
November 23, 2012 11:35 AM EST 34 Comments
Deutsche Bank AG co-Chief Execut  Anshu Jain says telling people he works in banking is a conversation-killer.
Photographer: Simon Dawson/Bloomberg
Deutsche Bank AG co-Chief Execut Anshu Jain says telling people he works in banking is a conversation-killer.

Deutsche Bank AG (DBK) co-Chief Executive Anshu Jain says telling people he works in banking is a conversation-killer at parties, as the industry fails to convince the general public that it’s changing.

“If you go to a party these days, you’re asked what you do and you say you’re a banker, people go all quiet,” Jain said before a conference on Europe’s finance industry began in Frankfurt. “We’re still the subject of anger.”

Europe’s top banking executives met in the continent’s financial capital this week to discuss the industry’s future. Among the most hotly-debated topics was how lenders can regain the public’s trust, battered by taxpayer-funded bailouts and the deepest slump since World War II.

Carl Graf von Hohenthal, a consultant at public relations firm Brunswick Group, says there’s a perception that bankers are earning too much and not helping to raise living standards across economies after the crisis squeezed spending power.

“Bankers should explain why they’re relevant, they need to be part of a dialogue,” von Hohenthal said in a telephone interview from Berlin yesterday. “There’s a lot of complaining but one really has to ask what the alternative is.”

Lost Trust

An Ernst & Young LLP study of more than 28,500 retail bank customers in 35 countries in March found 40 percent of those questioned had lost trust in banks over the past year while 22 percent gained confidence.

“We bank practitioners need to admit our mistakes,” Commerzbank AG (CBK) CEO Martin Blessing said in a speech in Frankfurt today. “The general public still seems to be convinced that not much has changed.”

The collapse of Lehman Brothers Holdings Inc. in September 2008 wiped as much as $16 trillion off equity markets, erasing returns from pensions. While monetary easing by the European Central Bank has boosted the liquidity financial markets needed to function, it’s also helped push inflation to an average 2.5 percent in the euro area. Investors get about 1 percent on savings placed in German deposit accounts. Unemployment in Spain and Greece is exceeding 25 percent after the countries’ economies failed to cope with the economic slump.

Bankers should be “aware of their role and the resulting responsibility,” German Finance Minister Wolfgang Schaeuble told the conference.

Among the events at this week’s conference was a panel entitled “Regaining Trust in Banking -- The Banker of the Future,” where top executives debated what they needed to do to restore public favor.

‘Scapegoat’

Wolfgang Kirsch, chief executive of German co-operative lender DZ Bank AG, said a night on the town in Frankfurt can often involve convincing people he’s doing his best to contribute to the recovery.

“There’s a significant danger of being made a scapegoat if you tell people you work in banking,” Kirsch told conference participants. “Clients may also be voting on that with their feet these days.”

The global decline in jobs is being reflected in the finance industry. Employment in London’s banks is expected to drop to a 20-year low in 2013 as firms shrink operations and shed staff. Employment may decline to 237,000 next year compared with 354,000 in 2007, the Centre for Economics and Business Research said earlier this month.

Sharing the Pain

“London has lost more than 100,000 jobs, but that is not the public’s perception,” Gillian Karran-Cumberlege, partner at recruitment firm Fidelio Partners, said by telephone from London. “People think that banks caused the financial crisis and that they didn’t share the pain.”

Jain and his fellow CEOs are cutting costs and laying off staff as they follow orders by regulators to boost reserves of capital and liquidity to help stave off another crisis. The funds might otherwise be used to fund loans to consumers and businesses, or to invest in capital markets.

Investment banks will cut another 40,000 jobs and bonus payouts may be “permanently lower,” Munich-based Roland Berger Strategy Consultants GmbH said in a report this week. A third of global banks will shrink, leaving fewer than 10 with a worldwide footprint, it said.

Deutsche Bank paid an average 332,785 euros ($429,300) in salary and bonuses to its 15,184 investment and transaction bankers last year, down from 378,659 euros in 2010, according to company data. That’s more than 10 times the average wage in the German economy, figures published by the Organization for Economic Cooperation in Europe showed. Employees in retail banking get paid considerably less than investment bankers.

Curbing Compensation

Three percent of the audience participating in a poll at a conference panel in Frankfurt today said curbing compensation should be the biggest priority for CEOs. Increasing capital and changing industry culture, with 36 percent and 30 percent respectively, rated as the most critical, according to the instant electronic survey.

Jain earned 5.81 million euros in salary and bonuses last year as head of corporate and investment banking compared with 7.55 million euros in 2010. He became co-CEO in June.

Almost one-fifth of employees in London’s financial district don’t expect to receive a bonus in 2012 compared with 11 percent in 2011, according to a survey by recruitment website eFinancialCareers.

Deutsche Bank has named a panel of business executives to review its compensation system “to place it at the forefront of cultural change in the industry,” Jain and co-CEO Juergen Fitschen said last month.

Back Office

Oliver Wagner, who leads an association of foreign banks doing business in Germany, said executives should keep telling people what bankers do each and every day.

“Most bankers do very normal business and work in the back office,” he said. “We have to show what we do in payments, what we do cross-border and what we do by working with companies that expand abroad. Then we’ll get more understanding of our jobs. We have to be role models.”

Jain turned down a request by the German parliament to testify at a hearing next week about allegations of manipulation of the London interbank offered rate. Stephan Leithner, his most senior executive for compliance, will attend instead, the bank said two days ago. Deutsche is one of at least a dozen banks being probed. Barclays Plc (BARC) Chief Executive Bob Diamond resigned in July after his bank was fined 290 million pounds ($462 million.)

Deutsche Bank never asked for a state bailout during the financial crisis and Jain says he’s still glad he went into banking.

“I’ve always been proud of what I did for a living,” Jain said in Berlin on Nov. 17.

To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net; Annette Weisbach in Frankfurt at aweisbach1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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