Bad news for tech bonuses: Deutsche Bank is squeezing
Deutsche Bank's technology division has faced its fair share of criticisms in recent years. Former COO, the late Kim Hammonds, described it as the "most dysfunctional place she's ever worked." In recent times, the bank has been working hard to rectify this, but it's come with a spending squeeze that might make itself apparent in bonuses.
In Deutsche's Q4 earnings report today, the bank announced that over 1,500 apps at the bank have been retired since 2019. It's been a long time coming. Ex-CEO John Cryan intended (and failed) to cut over 90% of the bank's operating systems by 2020, and DB has been making up for lost time. In a measure of the need for change, the bank once had 100 different booking systems in London for FX trades alone. Latterly, it's been investing in automated fixed income trading systems.
In the new world of Deutsche Bank technology, there's a real emphasis on the cloud. Over 200 apps have migrated there to "improve developer productivity and increase tech availability while building future platforms" according to their Q4 earnings presentation.
A short walk over to Switzerland would see UBS doing a similar thing with similar results. The Swiss bank said this week that it's decommissioned over 600 applications and that 65% of its tech department is operating through the cloud.
Similarities between Deutsche and UBS's technology spending aren't restricted to the cloud, though. Both banks are also squeezing their tech costs, and are doing so in the same way. Deutsche said today that it cut its spending on technology from €4bn in 2019 to €3.6bn last year and that it plans to make a further €600m in cost savings by 2025. These are to be achieved by the trusted techniques of decommissioning another 15% of applications and migrating 90% of targeted applications to the cloud.
Something similar is occurring at UBS. In its own report this week, the Swiss bank said it plans to cut $200m from its tech costs by 2023, again by decommissioning applications and shunting others to the cloud. At UBS, this money is being reinvested, though.
Now that technology has become a source of cost-cutting, the danger is that the squeeze makes itself felt in technology pay. In our bonus expectations survey in November, technologists weren't that optimistic about compensation this year. Reports from US banks suggest that bonuses were targeted at key developers and that others were disappointed.
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