Spehn’s long-shot bet on the once-distressed Israeli shipping company has put the German lender on track for one of its biggest wins since its “Big Short” trades against U.S. subprime securities more than a decade ago. With the world’s 11th-largest container shipping carrier now riding the wave of record-high freight rates, Deutsche Bank’s potential windfall could climb to almost $1 billion.
Starting in 2016, the distressed-debt trader wagered under $100 million on bonds and bank loans of Zim that were trading at a heavy discount. He also bought equity in the company for a few million dollars amid depressed shipping rates. Those investments have now surged and could effectively hand Deutsche Bank a win that would be equal to about a quarter of its 2020 investment banking profit.
How does one account for an honestly-earned $1 billion at Deutsche these days? Certainly, it needs the money, but also, it needs the money. Time for some back-of-the-envelope math and Apfelwein-dregs reading, for after all, von Moltke has also said there’s always wiggle room when it comes to eking out some savings for Big D.
Naturally, there will have to be a bonus conversation with Spehn, the trader (/risk manager) responsible. Back in the golden years of Deutsche bank trading revenue, Christian Bittar managed to negotiate a bonus of $140m for a single year. His alleged personal P&L was €2bn over five years, which might suggest that Mark Spehn should be setting an opening bid at $70m…. It’s genuinely difficult to know where to set Spehn’s bonus. This is the new Deutsche – the pre-crisis years are in the past and it’s likely that bonus records set before 2020 will stand for all time. Mr Sewing has been quite open in giving credit for the bank’s momentum to “people’s motivation”, though – it might send out a bad message if they ended up losing their newest star to a hedge fund.
Deutsche Bank Set to Reap $1 Billion on Trader’s Freight Bet [Bloomberg]
35 year-old Deutsche Bank trader’s massive bonus expectations. [efinancialcareers]