Deutsche Bank has agreed to increase salaries by 12.5 per cent for a large swathe of its German staff, adding to cost pressures for chief executive officer Christian Sewing.

Roughly 8,700 employees at the Postbank retail business will see their wages go up by 7 per cent in June and then receive a second raise of 4.5 per cent in July next year, Deutsche Bank said in a statement on Thursday (May 2). An additional agreement to raise everyone’s pay by at least 270 euros (S$393) in June means the average increase will be 12.5 per cent through the period, a spokesman said.

Sewing has pledged to cut expenses and improve profitability, but wage inflation as well as other costs to fix client service problems have made that goal harder to reach. The lender said on Friday it will set aside as much as US$1.4 billion in legal provisions tied to Postbank this quarter, though it confirmed its full-year guidance for adjusted expenses, which strip out litigation.

First-quarter personnel costs at Deutsche Bank rose 9 per cent on the previous year’s period, it reported last week. Analysts polled by Bloomberg expect an increase of 1.3 per cent for the year as a whole. 

The Postbank unit is going through upheaval after an IT project last year caused service problems for thousands of clients. Deutsche Bank management board member Claudio de Sanctis, who oversees the lender’s retail business, has vowed to cut branches at the business and he has said there’s “no way around job cuts.”

The wage deal on Thursday ends months of negotiations with the trade union Verdi, which had initially asked for a raise of 15.5 per cent. BLOOMBERG

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