When the going gets tough, the tough get going, or so it seems with Deutsche Bank. The troubled German titan on the global banking scene had no sooner filled one of its major profit centers with a new pedigreed foreign exchange trader and specialist than the fellow up and quit without explanation. Ernesto Mercadente no longer heads the FX Sales division within the bank. He had been brought on board back in July to replace Amedeo Ferri-Ricchi, who left a 14-year career with the bank for derivatives broker JB Drax Honoré in June and who had been a large revenue generator for the bank, as well.
Mercadente had assembled an impressive curriculum vitae in Europe, having served at both JPMorgan and Goldman Sachs. His most recent stint was for four years at Goldman as the co-head of EMEA FX sales. Prior to this position, he was the head of Southern Europe and CEEMEA FX for JPMorgan for five years. The news of his departure came from an efinancial careers website, which was unable to contact either Mercadente or Deutsche Bank for comment. It is unclear as to why Mercadente left so suddenly, and he has given no hint of his intentions going forward.
Articles back in July intimated that Mercadente would join the bank to assist in the restructuring of its investment division. It was public knowledge at the time that the bank was planning to cut up to 20,000 jobs, with a major focus on trimming its investment group. Per reports from Financial News:
The foreign exchange desk sits within Deutsche’s vast fixed income sales and trading business, which accounts for more than half of all revenues generated by its corporate and investment bank. Fixed income revenues fell 19% year on year in the first quarter, to €1.5bn.
Early speculation is that Mercadente was confronted with the prospect that Deutsche Bank was planning to cut bonuses by 20% to meet demands for an acceptable return on tangible assets, but, for a new employee at his executive level, commitments would have already been made in his employment contract. Deutsche also has a reputation in the industry for paying higher salaries and less variable incentives. Average compensation at the bank for a senior FX trader is $800,000, some 30% over competitors, who pay more on the discretionary bonus end for actual results.
Barring any issues with bonus arrangements, Mercadente may have found the current situation at the bank as untenable and far too difficult a challenge. Per a recent article in the Washington Post:
At this point, Deutsche Bank AG’s biggest problem may be how many problems it has, how long they’ve gone on and how they’ve fueled one another. Years of low profits have spawned a long series of failed turnaround plans and a steady departure of senior executives.
Chief Executive Officer Christian Sewing, who took over the reins in April of 2018, recently backed away from a proposed acquisition of its rival Commerzbank AG, claiming: “The deal would do more harm then good”. With a failed acquisition attempt and cost-cutting plans that have not produced the expected results, Sewing is faced with a new turnaround plan that will require downsizing its global presence, disposing of non-performing assets, and focusing on new business endeavors.
The bank’s reputation, however, has taken a multitude of blows over the past decade, not to mention some $17 billion in fines for “misconduct”. The bank is known to have the largest derivatives book in the world, which also implies a large amount of risk to go with it. There have also been allegations of several high profile money laundering escapades that dealt with Russian oligarchs and other shady business profiteers on the global stage. To this mix, Sewing must now add finding another senior FX executive to head an area, which is targeted for major cutbacks and restructuring.