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Early indications are that 2009 could be a good year for pay

Evidently, there is no guarantee that the future will resemble the past, but this hasn’t stopped the New York Times from speculating what might happen if this were the case.

The paper points out that the rate at which many banks accrued compensation in the first quarter suggests a year of generous remuneration if it’s perpetuated over the next three quarters.

In particular, banks still seem under pressure to pay their remaining people, despite the healthy supply of their former employees trying to get back into the market. At Morgan Stanley, for example, the compensation ratio jumped to 68% in the first quarter.

It’s dubious whether the next three quarters will be as good as the first, however. As various people have pointed out, last quarter’s performance may have more to do with AIG unwinds, wide spreads and a low cost of funding than any fundamental recovery. A recent note from Credit Suisse pointed out that, “the revenue line [for European wholesale banks] is less than half its 2007 level, while costs have not been reduced by anything like as much.”

First quarter pay:

First quarter pay.

First quarter pay.

Source: New York Times (upper graph gives name of bank and compensation ratio at that firm, graph directly below shows annualised pay per head at the same bank based on Q1 payouts).

Comments (10)

  1. Are early indications the new Goldman Sachs?

    I can’t stop laughing as I write that.

  2. Bobby, you are not funny. The fact that you find yourself amusing suggests you are either delusional or stupid.

  3. Sarah, where’s Henry’s article he said he wrote on Friday?

    Henry’s #1 fan Reply
  4. it did actualy put smile on my face what he wrote

  5. It’s coming, probably this afternoon.

    Sarah, Editor, eFinancialCareers Reply
  6. Oh good, the EFC brand name is set to take a further tumble this afternoon in the name of generating a ranting but volumious comments thread. Just what this country needs, another tabloid!

    Is EFC the next News of the World?

  7. Jester, I haven’t actually read Henry’s article yet, so can’t comment on the content. In general, however, I feel he makes valid, if contentious points that are worthy of debate. He has written no more than two articles constituting no more than 1 out of the 20 or so pieces we post every week, so can’t be accused of lowering the tone too much. You (along with anyone else reading this) are very welcome to submit your own more substantive guest comments to editor@efinancialcareers.com.

    Sarah, Editor. eFinancialCareers Reply
  8. Is 1Q09 to the new 3Q06?

  9. Why such continually glib analysis by this website? These ridiculously high level and aggregated figures would correlate if anything with the fact that banks have made redundancies at lower levels, e.g. Associate and VP, averaging up the salary per head because the MD’s and ED’s are still there. It’s not rocket science.

  10. Yawn – thank you for that interesting observation. I don’t think you can discount the fact that banks also had a good first quarter in looking at their allocation to pay per head. As stated glibly in the article, this may not continue, however.

    Sarah, Editor, eFinancialCareers Reply

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