As a follow-up to our earlier article on the state of bonuses, cash caps and deferrals on a bank-by-bank basis this year, here's what we know now.
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Cash bonus cap? Yes, but it only applies to high earners and appears illusory. BAML is capping cash compensation at $150k for people earning $1m or more. At lower levels, it’s paying either all cash or stock that vests on February 15th 2012. One headhunter told us he’d encountered a BAML banker on $300k who’d been paid 20% cash and 60% stock vesting in February – meaning he’d effectively received $240k cash.
Mitigating features: See above. The BAML cash bonus cap appears to be a cap in name only.
Deferrals? Bloomberg reported that deferrals at BAML were going to be more punitive this year.
Historically, Bloomberg said BAML paid people earning between $250k-$499k, 60% in cash and 40% in restricted stock. This year, it's allegedly paying people in that bracket 18.75% in cash, 25% in restricted stock and 56.25% in unrestricted stock. In reality, this appears to be a less punitive structure because the unrestricted stock can be sold immediately.
Between $500k and $999k, 40% of BAML bonuses will apparently be paid in restricted stock, 15% in cash and 45% in unrestricted stock.
And above $1m, 70% will be paid in restricted stock with 30% in cash or unrestricted stock.
Headhunters say BAML’s restricted stock vests over three years.
Amounts: Bank of America doesn’t break out pay in its investment bank. Overall, pay is said to be down by an average of 25%.
Executive compensation: Not known yet.
Unhappiness quotient: Neutral. Unlike James Gorman at Morgan Stanley, Brian Moynihan is trying to mollify people who might like to leave. “Our employees know what they've contributed and how they're paid,” he said recently.“We're with people every step of the way, so the discussions are always open and honest and fair.”
Cash bonus cap? Apparently not. One headhunter claims to have encountered a Citi banker with a $350k bonus, of which 75% was cash.
Mitigating features: There’s no need to mitigate the cash cap as there isn’t one.
Deferrals: Cash at Citi is apparently being paid in two tranches – one now, one in December. Stock is thought to be deferred over three years.
Amounts: The absolute level of bonuses at Citi is not understood to have been great. Bloomberg reported that bonuses in the investment bank were cut 30% on average and that some people had their bonuses cut 70%. Headhunters informed us that a lot of people were paid down and that, in equities in particular – where Citi allegedly lost money in the fourth quarter, 40% were paid zero.
“People at Citi are telling me their total comp levels are very down,” says an investment banking headhunter. “There are VP2s who are getting paid the amount they received as associate 3s a few years ago.”
Executive compensation: Vikram Pandit was awarded $3.7m in stock. Notably, in July last year he also received the remaining $80m of the $165m Citi owed him from the 2007 buyout of his hedge fund.
Unhappiness quotient: 6. The cash component of Citi’s bonuses is good. The size of its bonuses is bad.
Cash bonus cap? Yes. Credit Suisse is also alleged to be capping cash bonuses at CHF140k ($152k), although some claim its cash bonus cap is as low as $100k. This follows an earlier memo claiming cash bonuses were to be capped at CHF205k (£172k).
Mitigating features: A far higher proportion of junior pay than previously is allegedly being paid in cash, and stock deferrals are thought to be have been reduced from four to three years. However, Credit Suisse has also introduced a new ‘Partner Asset Facility’ scheme in which its investment bankers will receive part of their bonuses in derivatives owned by the bank. This won’t vest for four years and is seen as a fairly unattractive structure.
Executive compensation: TBC. Last year, Brady Dougan was allocated a huge £43.9m.
Other pay news: Credit Suisse is said to have put an end to the practice of automatically increasing pay on an annual basis for its analysts and associates.
Unhappiness quotient: Thought to be high among senior staff with high deferrals.
Cash bonus cap? Maybe. Deutsche’s bonuses have only just been announced and we haven’t had confirmation of this, but there are rumours the bank’s deferring 70% of compensation above €50k (£41k) and 85% above €100k.
Mitigating features: We do not know of any.
Deferrals: TBC. See above.
Amounts: Compensation per head in the corporate and investment bank was €332k for 2011, down from €379k in 2010. Anshu Jain said compensation in the investment bank was down, “very significantly” and that a “very high percentage” was deferred.
Executive compensation: TBC
Unhappiness quotient: High, if deferral rumours are true.
Cash bonus cap? Yes. Cash bonuses are capped at $125k (£81k). Cash bonuses are reportedly deferred and paid in two equal instalments in December 2012 and December 2013. This is better than the previous plan, in which Morgan Stanley’s cash bonuses were deferred over 18 months.
Mitigating features: Any Morgan Stanley bankers earning up to $250k (£163k), will receive all their compensation in cash.
Deferrals? Junior deferrals said to be capped at only 25% after complaints last year. Recruiters confirm this, saying associates are only having 20% of their comp deferred. Overall, Bloomberg reports that the deferral rate for 2011 at Morgan Stanley has been increased to 75%, up from 60% last year and 40% in 2009. Restricted stock vests over three years.
Amounts: Compensation and benefit costs in Morgan Stanley’s institutional securities division (investment bank) actually rose 3% last year. However, James Gorman stressed that this was partly due to previous years’ deferrals. Morgan Stanley is said to be reducing pay for senior bankers and traders by 20-30%.
Unhappiness quotient: 4. Anecdotally, Morgan Stanley’s bankers appear to be happier than expected. The bank did a good job of expectation management prior to the event. James Gorman has, however, caused irritation by suggesting that people disgruntled with their bonuses are naïve and need to read the papers. “If you put your compensation in a one-year context to define your overall level of happiness, you have a problem which is much bigger than the job,” he said, adding: “if you’re really unhappy, just leave. I mean, life’s too short.
Cash bonus cap? No. Headhunters say that associate level staff have received 75-100% of their pay in cash at Goldman this year. However, there have been rumours that Goldman was planning to cap London salaries at £100k. According to the Wall Street Journal, more than half Goldman’s employees globally earn base salaries of less than $100k (£64k). During the Q4 conference call, David Viniar indicated that cash bonuses are down substantially at Goldman this year.
Mitigating features: Goldman had been paying salaries that were considerably higher than its rivals. Unfortunately, it’s now reducing these. In November last year, there were rumours of Goldman VP’s salaries being cut 40%.
Deferrals? The Wall Street Journal reports that Goldman “staffers’ aren’t allowed to cash in stock awards for five years. This seems a long time and hasn’t been confirmed elsewhere. To make matters worse, it says Goldman’s stock awards were priced at the close of trading on Thursday January 19th, after the stock had risen 6% to $107.68, thereby preventing recipients benefiting from the cheaper strike price previously. Since then, however, Goldman’s share price has kept rising – to $117.9.
Amounts: Overall, Goldman’s compensation pool was down 15% this year to an average of $367k per head. However, a significant proportion of this consists of deferrals from previous years.
Executive compensation: As we report, here, Michael Sherwood, co-chief executive of Goldman Sachs International and the main man in London, was given restricted stock worth $9.5m for 2011. This can’t be sold for five years. Lloyd Blankfein’s stock bonus was cut to $9m, a drop for the first time since the financial crisis. Gary Cohn and David Viniar each received $7m. The Wall Street Journal said Blankfein’s salary was $2m and that Cohn and Viniar each received salaries of $1,85m. Sherwood’s salary was unknown.
Unhappiness quotient: 7. Goldman bankers seem unhappy this year. “Pay is down 40% across the trading floor,” said one fixed income headhunter. “There are loads of zeroes and a lot of unhappy people.”
Cash bonus cap: Apparently not
Mitigating features: Rumours of very low deferrals at a junior end, with VPs earning £75k bonuses only having 10% deferred.
Deferrals? At other levels deferrals also seem to be low. First figures suggest JPMorgan’s bankers are only receiving 25% of their bonus in stock up to $1m, with 35% in stock thereafter. If true, this is clearly a lot more generous than Morgan Stanley. People with 35% deferrals are said to get 50% in the 2nd year and 50% in the third year.
Amounts: Compensation per head in JPMorgan’s investment bank was down 8% vs. 2010, to $341k. Again, this will include deferrals from previous years. In London, early reports suggest bonuses are down 20-35%, with high performers paid flat on last year.
Executive compensation: Jamie Dimon received a stock bonus of $17m, in line with last year. His cash bonus is said to have fallen to $4.5m from $5m, but this was offset by an equivalent rise in his base salary to $1.5m.
Unhappiness quotient: 3. As news of other banks’ poor bonuses and big deferrals leaks out, JPMorgan bankers are said to be comparatively happy.
Cash bonus cap: Seemingly not.
Deferrals? Seem low. As we reported earlier, only 28% of UBS’s overall bonus pool for 2011 has been deferred.
Amounts: Bad. UBS has reduced its investment banking bonus pool by 60%, to an average of £39k a head, of which £28k will be cash. Total compensation per head for 2011 at UBS’s investment bank averaged CHF337k, down 16% on last year.
Executive compensation: Unknown, but Sergio Ermotti has said he won’t accept a bonus this year.
Unhappiness quotient: Unknown. Given the state of the bonus pool, likely to be high. There is also a chance that bonuses from last year may be clawed back.