The message coming from the mouth of David Walker, Barclays' soon-to-be chairman, is very different to that historically been recited by Marcus Agius, Barclays' chairman since 2007.
Agius's mantra has long been that Barclays has had no option but to pay its talented people well: if it doesn't, they will go and work somewhere else. This was most recently uttered in April, when Agius said the talented investment bankers at Barclays would most certainly not be receiving zero bonuses this year and that it was, "not an option" to pay them badly.
Walker, by comparison, seems attuned to an entirely different reality. In yesterday's Sunday Times, he said bankers are paid too much and spelt out the situation facing not just Barclays' investment bankers, but investment bankers everywhere: now that nowhere is hiring, you will have to take what you can get.
“The argument that people will be bid up and lured elsewhere carries much less weight than it did even a year ago," said Walker, "...people are going to find the threat of going off in a huff much less successful....”
Under Walker and the yet-to-be-appointed new CEO, the implication appears to be that pay at BarCap will fall. It's fallen a lot already, and was down to £1.5m for code staff last year, from £2.4m the year before. This was in line with banks like Credit Suisse, was nearly double what was paid to code staff at RBS, and was a lot less than pay for code staff at US banks like JPMorgan.
Barclays' investment bankers will undoubtedly be disconcerted and disgruntled by David's diatribe - not least because in a difficult market they performed comparatively well in the second quarter of 2012. Having achieved an approximately 18% increase in revenues in a declining market, Barclays' FICC bankers in particular may be inclined to test the claim that they're not wanted elsewhere.
JPMorgan's FICC revenues declined nearly 20% year-on-year in the second quarter, suggesting it could do with some of the Barclays' FICC magic.
Unfortunately, however, Barclay's FICC bankers are unlikely to come across any big offers from that quarter. Daniel Pinto, the new co-head of JPMorgan's investment bank makes an appearance in the Financial Times today, saying that JPMorgan's investment bankers will also be paid less in future as compensation is aligned to higher capital requirements.
JPMorgan is aiming to boost its annual pre-tax profit by $1bn within five years by merging its investment and corporate banks. This too could create problems for JPMorgan's investment bankers as they work more closely with their corporate banking colleagues. In the first half of this year, the average investment banker at JPMorgan was paid $185k; the average corporate banker was paid $85k. The return on equity in the corporate bank was 28%; in the investment bank it was 19%. It doesn't take a genius to see where any adjustment in compensation is likely to fall.
(Addendum: This article originally called David "Derek." Apologies David. We've given you the right name now.)