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Deutsche insiders say the German bank wasted huge amounts of money.

Deutsche Bank equities traders' resentment over the 'McChrystal sessions' and other fripperies

Outside Deutsche Bank this morning

Now that Deutsche Bank is definitively closing its equities business (and moving prime brokerage and electronic equities to BNP Paribas), questions are being asked about exactly what went wrong. Fingers are being pointed at some of the big spenders of Deutsche's recent past. 

"There was a window of opportunity to turn equities around a few years ago and it was squandered," says one Deutsche Bank insider, speaking off the record as staff are still being cautioned against speaking to the press. "Instead, there were a load of guys who did little but enrich themselves, promote their friends and fail upwards while overseeing the downfall of Deutsche Bank equities."

As we reported last week, there is simmering resentment over the likely generosity of the severance package to be paid to Garth Ritchie, the former head of Deutsche's investment bank and ex-head of the equities business, who signed a five-year contract in 2018, ending in 2023. Ritchie's resulting expected large payout is all the more galling because Deutsche Bank has been being paying severance packages equivalent to the UK statutory minumum since February 2018.  Ritchie's pay rose to €8.2m last year, even as profits in the investment bank halved.

It's not just Ritchie. Some of Deutsche's U.S. equities staff are also upset about the banks' failures under John O'Brien, the former head of equity derivative flow sales who joined in 2014 and was named head of the U.S. institutional clients group with responsibility for fixed income and equities clients in 2018. O'Brien is still at Deutsche Bank, according to his FINRA Registration document.

Particular vitriol, however, appears to be reserved for Tom Patrick, the former global head of equities and head of Deutsche Bank Americas. Patrick too is technically still working for Deutsche Bank, according to his FINRA Registration, although he was reported as leaving last year.

Patrick is understood to have been the main initiator of senior DB staff training sessions with the  McChrystal Group, a consultancy firm run by Stanley McChrystal, a former U.S. general who led the Joint Special Operations Command in Iraq and who was top Commander of American forces in Afghanistan, in 2016.

"How many millions were wasted on hiring the McChrystal Group to paint fancy triangles on the wall and tell war stories to MDs?," questions one DB equities insider. "They had all these generals and ex-special forces people coming in and meeting with all of management, consulting on how to lead people," he adds.  "A bunch of us went down to DC for a few days and our big event was doing calisthenics and jogging around DC monuments. Then we came back and these posters were put up everywhere with these triangles on them showing how the business was going to be built." 

Deutsche Bank didn't respond to comment on McChrystal. Another DB equities professional says the idea of the exercise was to, "foster teamwork through common hardship" and to break down Deutsche's silo mentality. McChrystal himself has a history of getting different elements of the military to work together for a common purpose, and the intention was that Deutsche Bank teams comprised of people working across different product lines would compete in different physical activities. 

"Nothing much came of it," says one DB insider of the sessions. "God only knows how much they spent."

In a further attempt to motivate its U.S. staff, Deutsche was also understood to have bought staff copies of 'The Boys in the Boat,' a book about the 1936 Berlin Olympics. "They're still sitting at the bottom of people's desks," says one insider. 

Brad Kurtzman, the former head of Americas equities trading, who joined Deutsche Bank in 2012 and who left again in March, is also the subject of grumbling. Kurtzman was named co-head of equities trading in September 2018 and there was a big loss on the U.S. equities central risk book in November of that year - under his watch, even if he wasn't directly responsible. Kurtzman joined SquarePoint Capital, a hedge fund run by ex-Barclays traders, in May.

Lastly, there's Peter Selman, the former head of Deutsche Bank's equities business, who joined in 2017 and left again two weeks ago. Insiders say the floor fell silent when Selman turned up last week. "He came on Friday and looked really casual. He spoke to four or five underlings and then stayed in his office the whole time," says one DB equities professional who's lost his job today. "It seemed pretty cowardly."

Photo: Tristan Bejawn, copyright eFinancialCareers

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AUTHORSarah Butcher Global Editor
  • Ma
    8 July 2019

    People are incentivized to come up with fictitious project to justify their existence. You have these managers who are great internal salesmen, they no longer get paid on growth opportunities (they're too little) but on the resources spent (how many people in the reporting line, how big the budget etc..). It's all about selling fictitious projects, attaching a very speculative revenue target, getting the resources and making sure you do good self marketing to keep it going. Whether it leads to more business and increases revenue doesn't matter. Banks should face the reality of poor growth prospects and engage in lean cost management early on otherwise they will have to make those large cuts down the line.

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