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RPT-ANALYSIS-Deutsche Bank gambles German goodwill with bonus bonanza

(Repeats from FEB 2, no changes to text)

* Pay rises after third annual losses in a row

* Bankers' pay beats performance:

* Politicians, shareholders dismayed

By John O’Donnell and Tom Sims

FRANKFURT, Feb 2 (Reuters) - Deutsche Bank’s British chief executive may have done much to rebuild bridges between Germany’s biggest bank and its politicians, business leaders and general public, but John Cryan has gambled this goodwill in an effort to keep top bankers.

Cryan’s decision to push ahead with paying big bonuses, despite Deutsche Bank reporting heavy losses in 2017, is testing relations with German politicians and the public, many of whom deeply disapprove of high pay and Anglo-Saxon style capitalism.

Reactions to the bonus payouts confirmed on Friday were almost universally negative in Germany, including from the government in Berlin itself, leaving the 57-year-old former UBS investment banker with another huge public relations job to do.

For unlike his predecessor, Cryan has made a point of speaking German, staying attuned to the mood music in the local press and putting Deutsche Bank’s own backyard, rather than Wall Street and London, at the centre of its growth strategy.

“This is capitalism gone out of control and it’s bad for Deutsche Bank’s image in Germany,” Hans-Christian Stroebele, a prominent member of Germany’s Green party and one of the country’s best known liberals, said.

There is a growing debate in Germany about the gap between rich and poor. A prominent research institute published a study in January showing that a greater portion of household wealth was concentrated among the super rich than previously believed.

What really irks many Germans is that the bonus debate comes as Deutsche Bank slashes its headcount and on Friday reaffirmed plans to cut 9,000 jobs from 2015 levels, around one in 10 staff globally, with 4,000 expected to lose their jobs in Germany.

“Deutsche Bank management does the only thing it can in the circumstances,” Christian Ehring, one of the nation’s best known comedians, said on state broadcaster ARD this week: “Sack staff and swipe fat bonuses for themselves”.

In justifying his bonus plans, Cryan said Deutsche Bank was making a “one-off investment” to retain staff and that bonuses next year would be closely linked to performance.

But even the German government, which normally keeps a low profile when it comes to voicing opinions on private sector pay, aired its own scepticism after Deutsche Bank announced its third annual loss in a row, due to a drop in revenue from investment banking and a U.S. tax reform, but paid its staff more than 12 billion euros, 3 percent more than in 2016.

In investment banking, where Deutsche Bank posted a loss of more than 700 million euros during the final three months of the year, pay and bonuses in the same period jumped 45 percent year on year to more than 1.2 billion euros.

“The leadership team of a large corporation – including that of a German bank – must always pay attention to how its decisions are perceived in public,” Steffen Seibert told journalists in Berlin, reiterating similar remarks this week.

“They must also have a good argument for the public.”

Cryan defended the payout, while acknowledging the potential damage to Deutsche Bank’s image.

“We are in a particular time in Germany where the word bonus does still have a certain sensitivity,” he said. “But I think our job is to do what is right for the company overall.”

He said the bank’s restructuring reflected its allegiance to Germany, Europe’s biggest economy. Last year, it decided not to sell Postbank, a retail bank in Germany, which Cryan said was “a clear commitment to our home market”.

And Marcus Schenck, co-deputy CEO who oversees Deutsche Bank’s investment bank, pointed out that many U.S. banks fled Germany as the financial crisis hit in 2007, leaving companies there in the lurch. “We will never do that,” he said.

German investors, who have seen their shares fall in value since Cryan became CEO, also expressed unease.

“It is not clear why investment bankers should get high bonuses when their business is in the red,” Hendrik Leber, a fund manager at Deutsche Bank shareholder Acatis, said.

And Markus Kienle of the SdK, a group that represents German investors, said he could not see why Deutsche Bank was doing so.

“If you’re not going to be measured by your results in paying the bonus, what then?” Kienle added.

As well as negative headlines in German newspapers and broadcasters taking a critical stance on the bank’s bonus payout, which has been hotly discussed since rumours circulated at the beginning of the week, even comedians have weighed in.

“Half a billion loss but a billion in bonus because top managers would otherwise go to the competition?” Martin Sonneborn, a German comedian and European Parliament member joked on Twitter, prompting a flood of “likes” in response.