Sideways: Timing is everything at Deutsche Bank | Euromoney (original) (raw)

Photo: Reuters

Timing is everything in finance, especially if you work at Deutsche Bank.

Shikha Gupta, a former credit trader at the firm, has lost a claim for £2.6 million over the non-payment of a suitable bonus for her work in 2016. A British judge on September 5 agreed with the bank that Gupta had been given no formal assurance about a bonus for her role in winding down Deutsche’s non-core credit exposure and that the firm had no obligation to pay bonuses, given its dire financial condition at the time.

The ruling seemed to uphold the principle attributed to movie mogul Sam Goldwyn that a verbal contract isn’t worth the paper it is written on.

It also underscored the importance of timing in finance. Gupta worked at Deutsche between 2008 and 2017, meaning that she missed both the glory days of value extraction by traders in the approach to the global financial crisis in 2008 and the bank’s eventual recovery from its trading excesses after Christian Sewing became chief executive in 2018.

Gupta’s great misfortune was to miss the paydays under Rajeev Misra, who ran credit trading at Deutsche before making an impeccably timed departure in June 2008

Gupta’s great misfortune was to miss the paydays under Rajeev Misra, who ran credit trading at Deutsche before making an impeccably timed departure in June 2008, a few months before the failure of Lehman Brothers brought chaos to markets and huge losses to his former employer.

Deutsche paid well over €4 billion in bonuses for each of 2006 and 2007, with the biggest payouts going to staff in the global markets division that housed credit trading and many individual trading managers clearing more than €10 million a year.

There were also opportunities to co-invest in deals done by the bank.

Sadly for Gupta, her own role in cleaning up a portfolio of over $10 billion of asset-backed securities and other credit instruments that were once housed in Deutsche’s principal trading unit Winchester Capital was less well remunerated.

After Deutsche’s non-core operating unit fulfilled one of its main goals with an agreement in January 2017 to pay the US Department of Justice $7.2 billion for misleading investors in its mortgage-backed securities, Gupta was allotted a bonus for 2016 of just over £20,000, and soon afterwards made redundant.

Violence

Gupta’s annoyance is understandable. Not only did she miss the party days of credit trading at Deutsche, including when the Rolling Stones were hired by global markets head (and future bank co-CEO) Anshu Jain to play at a dinner for clients in Barcelona in July 2007 for a fee of over €4 million, but she may have learned some valuable lessons for her current role as an investment manager at credit hedge fund Astra Asset Management, which was set up by two other former Deutsche Bank credit trading employees, Christian Adler and Anish Mathur.

In a market where creditor-on-creditor violence is becoming an increasing feature of liability-management exercises that restructure debt, a well-earned wariness may be a differentiating factor.

Deutsche is currently in the process of moving its London staff from Winchester House – for which Winchester Capital was named – to a new headquarters above Moorgate tube station.

Deutsche has billed its new office at 21 Moorfields as a building “where our past, present and future meet”.