The banks with the wherewithal to hire in this market are not those that pay well.
During this presentation, Staley said that, if it wanted JPMorgan could have started a “compensation arms race” had it wanted, as its revenues were better than many peers. It didn’t. Instead, JPMorgan is maintaining its 17% ROE target and keeping pay and costs down. In 2011, JPMorgan's investment bank $341k per head, down 7% on last year and less than the $367k paid by Goldman Sachs – at which ROE collapsed to 3.7% in 2011.
Meanwhile, Standard Chartered released its annual results yesterday. Last year, it achieved a return on equity of 12.5%, added 1,400 people, and increased operating profit in its wholesale business by 9%. While most other banks’ sales and trading revenues declined substantially in 2011, revenues at Stan Chart’s sales and trading businesses increased 12% year on year.
Standard Chartered is not renowned for its generosity to employees either. The bonus pool for its 15,000 wholesale employees is $1.3bn (£815m), or £54k per head. Whilst generous compared to RBS, this is considerably below the likes of Goldman Sachs and Credit Suisse.
Standard Chartered said it pays, “upper quartile,” in each market it operates in for excellent individual or business performance. However, it also kept this year’s bonus pool static – despite its excellent performance – and warned that it faces “steep competition” for talent (suggesting people would prefer to work for higher paid rivals.)
Both Standard Chartered and JPMorgan appear to be adding staff. Standard Chartered wants to hire another 2,600 people this year as other banks cut headcount.
In yesterday’s presentation, Staley outlined several areas of expansionary focus for JPMorgan in 2012, including:
- Prime broking in Asia
- Commodities in developing markets
- ‘International expansion’ and the addition of ‘local market capabilities’ (even while rivals retrench to key markets)
It's notable that in times gone by, the best performing bank (Goldman Sachs), was by far the best paying. Hence in 2007, Goldman paid an average of $661k per head – more than twice the $312k on offer at the time at JPMorgan’s investment bank.
Today, however, JPMorgan is by far the best performing bank, but it has not increased pay to reflect this. That is saying something. If you work in banking, the message may not be welcome.
The charts below, from research firm Tricumen, highlight JPMorgan’s exceptionalism in most markets. By comparison, Citi and Credit Suisse in particular, look like they may be best avoided.