Now that we know how much JPMorgan, Goldman Sachs, UBS, Credit Suisse and Deutsche have accrued for their investment bankers in the first quarter, we can say two things.
1. American banks pay more (with the exception of Deutsche, whose pay per head figures for the corporate and investment bank aren’t comparable because, unlike elsewhere, it doesn’t count its back office staff in its headcount).
2. Pay is falling
Here is the pay hierarchy, based on average compensation per head, accrued in US dollars for Q1. This includes payroll taxes and suchlike.
1. Goldman Sachs: $135k
2. JPMorgan investment bank: $113k
3. Credit Suisse: $108k
4. UBS: $97k
On average, pay fell 13% in the first quarter. Goldman and JPMorgan cut pay the least (-9% year-on-year). Deutsche (which is at least comparable with itself) cut pay the most (19% year-on-year).
Notably, however, pay competitiveness is no longer about absolutes. It’s about structure. Mostly, it’s about how long you have to wait for what you’re owed.
Therefore, although UBS appears to pay the least, it was keen to emphasise this morning that it’s not really deferring much of its compensation: only 27% of its compensation across the bank will probably be deferred this year. In the recent past, it deferred 35-40%.
Unfortunately, this may not be enough to improve UBS’s allure. In its latest newsletter, search firm Riverhouse Partners points out that Goldman Sachs and JPMorgan appear to pay very high proportions of cash – even to their very high earners.
Hence, they say people earning up to $2m at Goldman received 80% of their compensation in cash last year. And people earning up to $1m apparently received 70% of their compensation in cash at JPMorgan.
European banks (many of which have cash caps) are therefore losing out doubly: they pay less, they defer more. It doesn’t take enormous astuteness to see that US banks are more appealing. The only problem is that US banks aren’t keen to buy out stock when hiring from their European rivals. This leaves a conundrum: do you cut your losses and try escaping a European bank now, or do you hang on and get even more tied-in? Hmm.