It's early days. So far, comparatively few banks have announced their bonuses for 2017 and there are mixed reports at those that have. One thing is certain though: the U.S. banks announcing their bonuses now will be more generous than the Europeans that announce later.
So far, the most is known about bonuses at Morgan Stanley and Citi. Morgan Stanley announced last week and Citi announced yesterday. J.P. Morgan is understood to be announcing today, with Goldman Sachs announcing over the next few days and Bank of America announcing early next week.
The news is generally held to be good in investment banking divisions (IBD), where the bonus pools at Morgan Stanley and Citi are held to have been up around 8% and 9% respectively. This hasn't come as a big surprise: at Citi, revenues across IBD (M&A, ECM and DCM) were up 20% last year. In equity capital markets (ECM) in particular, Citi's 2017 revenues were up 68%. "People in M&A are quietly happy. Bonuses have been in line with expectations and I haven't had the usual rush of calls from upset people," says one M&A headhunter, speaking off the record. "It's all been pretty positive," agrees a capital markets headhunter, adding the caveat that while overall bonuses are up there are still people who've been paid 30% to 40% down. "It's increasingly performance driven," he says. "I've seen an MD at Morgan Stanley on $2m and another in the same area on $800k. And we're still seeing bonuses reallocated from MDs to vice presidents and associates, which is where most of the hiring is."
While IBD bankers are generally happy, the same can't be said for people in fixed income. Here, the story is more mixed. Morgan Stanley has yet to report its full year results for 2017 (they're out this Thursday), but in the first nine months of the year, fixed income sales and trading revenues at the bank were flat on 2016 while rival U.S banks were significantly down. After several years of poor bonuses, this created an expectation that Morgan Stanley would finally pay-up. It doesn't seem to have done so.
"People are happy-ish at Morgan Stanley, but in my opinion they're still paying a lot less than other banks - particularly when you look at what people have been given at Citi," says one macro headhunter, speaking on condition of anonymity. "A lot of people at Morgan Stanley did well in terms of revenues and were expecting to be paid up, but were paid flat," claims another fixed income headhunter. "Pay was up slightly at credit desks on Morgan Stanley, but it was still pretty tight," a credit headhunter says. The head of a London fixed income search boutique says Morgan Stanley's fixed income business has been paid well, but that this is only, "relative to bad pay last year and for the previous few years." Another headhunter says some salepeople at Morgan Stanley have been zeroed.
It's at Citi, then, that fixed income bonuses seem to have been best so far, particularly in trading. "Traders at Citi seem to have been paid well," says one fixed income headhunter. - "Salespeople less so." What does Citi's high pay look like? "There are traders at Citi who got 7% of their P&L," he says.
In equities, headhunters say Citi has paid up despite its mysterious $130m loss from a “single client event”. "The best people there are being 15% more than last year," says one equities headhunter. "The senior people in Citi's equities business are conscious that people could leave for Morgan Stanley or J.P. Morgan." At Morgan Stanley, equities bonuses are understood to be up anything from 0% to 10% with rare individuals up 20%.
The big question now is what happens to pay at J.P.M and Goldman Sachs. J.P. Morgan is said to have "carefully managed expectations." At Goldman, there are said to be fears that all last year's hiring has eaten into the bonus pool and that existing staff will suffer as a result."
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