Contradictory messages are being purveyed on the future of investment banking compensation. On one hand, Jamie Dimon thinks compensation will remain high. On the other, Kenneth Jacobs, chairman and chief executive of Lazard, thinks it won’t.
Dimon’s justification is simple: banking is a low capital intensive industry [which is reliant upon employees to add value]. As such, employees are inevitably better rewarded than in high capital intensive industries such as automotive manufacturing.
Financial News points out that Jacobs, on the other hand, thinks that falling leverage, reduced risk, and increased capital intensity are putting pressure on revenues and costs and that banks need to either lay people off or reduce compensation as a result. “We think this is a secular trend,” he says gloomily.
Citigroup, meanwhile, is said to be preparing to pay a lot of zero bonuses this year. Reuters claims to have spoken to a, “senior Citi insider,” who says only key investment bankers with relationships that bring in fees will definitely get a bonus for 2011.Things are arguably looking particularly bleak at Citi in EMEA. The bank is bringing in Mike Corbat, current head of Citi Holdings, to run the region next year, suggesting current management may be in a weak position when it comes to fighting for the region’s share of the bonus pool.
While the compensation outlook seems inspid at Citi and Lazard, it’s a little more impressive at Canadian banks, which are in the process of reporting their results. The Financial Post points out that bonuses and profitability have proven very resilient at Canada’s four largest banks, as illustrated in the charts below.
Source: Financial Post
RBC released its fourth quarter results last week. Net income at the investment bank fell a mere 4% in 2011, whilst revenues were broadly stable and headcount increased by 223 people. With luck, RBC will continue hiring in Europe next year: its strategic objectives include growing in the continent, ‘by building more corporate client relationships in origination, equity sales and trading and research.’
"Acting like everyone who's been successful is bad and that everyone who is rich is bad — I just don't get it," said Dimon at the conference, which was organized by Goldman Sachs. (CNBC)
Since 2010, Evercore has hired 26 senior managing directors, and 7 have left. (Evercore)
Numis plans to expand in DCM. (Financial Times)
The former chief executive of Merrill Lynch Alternative Investments has got a job atAbu Dhabi’s sovereign wealth fund. (Financial News)
Every day, every hour, Jon Corzine feels sad. (Business Insider)
Corzine will portray himself as an executive building a company with the full knowledge of the board of directors, rejecting any suggestions that he was a rogue risk-taker. (Financial Times)
Standard Chartered plans to hire 1,000 people this year. (Telegraph)
Standard Chartered expects to pay $185-195m to stay in theUK this year and is, “increasingly understanding the steps” it would have to “take to leave.” (Evening Standard)
Standard Chartered expects to add 2,000 net new staff next year, but appears to be engaged in a simultaneous programme of voluntary redundancies. (CityAM)
Merkozy wants to take control over British corporation tax and employment rules, and to impose a financial transactions tax. (CityAM)
A new facility run by the Depositary Trust & Clearing Corporation (DTCC) is being set up in London to collect trading data. Data collection jobs may ensue. (Telegraph)
Considering that re-hypothecation may have increased the financial footprint of Eurozone bonds by at least four fold then a Eurozone sovereign default could be apocalyptic. (Thomson Reuters)
50% of the wealthiest 1% of Americans have postgraduate education, vs 16% of the rest.(GrekMankiw)
Fred Goodwin has employed Norton Rose to scrutinize the RBS report on his behalf prior to its publication. (DailyMail)
Occupy Protestors are offering a financial crisis tour of London. (Independent)
Lloyds Banking Group is offering comedy coaching to its staff. (Telegraph)
Sitting down encourages your body to increase lipid fat production. (Telegraph)