Several things have changed since we last looked at different banks’ different compensation structures a few weeks ago. Here, therefore, is a new list of banks according to the generosity of their bonus systems. Let us know if you have anything to add.
1). JPMorgan :
Despite being a notorious cost cutter, JPMorgan boss Jamie Dimon has come out strongly in favour of unhindered bonuses. Average compensation per head at the investment bank was down just 13% in 2008 and JPM has been castigated by analysts for high staff costs.
As a recipient of TARP money, JPM is constrained by US US government pay restrictions – namely the top five executives and the twenty highest earners can’ receive more than one third of their total payment in the form of a bonus. At their most punitive, the new rules may mean that no one can receive more than $750k.
Dimon has indicated disapproval. Last week he said he was waiting to see what the Treasury says with regards to pay caps, but that if they were imposed and he lost his best people as a result he would be “particularly upset.”
As far as we’re aware, JPMorgan does not currently use clawbacks or pay bonuses entirely in restricted cash or stock, unlike some of the other institutions on this list.
2). Goldman Sachs:
Last month, Lloyd Blankfein declared himself in favour of increasing the equity portion of deferred bonuses and evaluating performance over time. He also said that chief executives should be required to retain most of the equity they receive until retirement, and that equity delivery schedules should continue vesting after individuals have left the firm. However, with the exception of increased equity, there is no sign that any of this is currently in place at GS itself. Moreover, Goldman is helping its bankers out by easing the rules on restricted stock. Potentially onerous TARP restrictions apply.
3). Deutsche Bank
The investment banking bonus pool at DB was said to be down 60% this year, but depending upon who you talk to cash bonuses at the bank were relatively generous compared to elsewhere. Front office bankers in London apparently received between, 100-150k in cash comp , with anything above that deferred for up to four years, during which time interest will paid at LIBOR.
Less promisingly, German Chancellor Angela Merkel is mooting proposals to cap ‘managers’ pay’ at all German banks.
However, there is no talk of all stock bonuses or clawbacks.
4). Barclays Capital
The bonus pool at BarCap was down around 50% and the bank has introduced a deferred compensation regime, under which bankers will receive compensation in three stages – 50% up front, followed by two further payments of 25% each up to 24 months later. The good news is that there are no clawbacks and interest of 10% will be paid on the deferred portion.
5). Bank of America:
BofA tried to introduce a new comp scheme which was said to involve placing 70% of the bonus pool into a deferred regime, under which the first third would be paid out in quarterly payments this year, followed by the second and final thirds in 2011 and 2012. The remaining 30% would go into an equity deferral plan vesting over the next three years. However, the bank was forced to amend this programme following objections from staff. Under the amended arrangements, everything will now vest before 2010.
Potentially onerous TARP restrictions apply.
6) UBS :
Bonus recipients aren’t doing well at UBS. The bonus pool at the investment bank is apparently down 85%, and some MDs and SVPs/directors are said to be receiving no bonus this year and 100% stock bonuses in 2010, vesting over three years. UBS has also introduced clawback or malus provisions, allowing it to refrain from paying stock if the bank incurs a loss during the vesting period.
However, on the upside UBS has tried to make amends by increasing basic pay. According to the New York Times, senior UBS bankers are having their salaries ramped up to 300k.
The US government now owns around 35% of Citi, so the TARP restrictions apply.
For the moment, however, Citi’s bonus arrangements don’t seem too punitive. Around 25% of Citigroup bonuses are said to have been paid in the form of deferred cash and shares paid out over the next four years. This compares favourably to the institutions listed above. But Citi is also said to be imposing clawbacks. TARP restrictions apply.
8) French banks:
French banks have signed up to a new code of ethics agreeing to limit bonuses, peg them to long term performance rather than short term profit, pay more stock, and eliminate guarantees for any non-key staff. French banks appear to be following this to the letter: the bonus pool at the corporate and investment banking division of BNP Paribas was down 70% in 2008 and the bank is paying no cash bonuses this year, with stock payouts in four tranches between June 2009 and 2012. To make matters worse, all tranches are subject to a clawback dependent upon returns on equity.
SocGen says it’s slashed bonuses in CIB and is considering deferring half of all bonus payments and paying shares to reflect future performance.
9). Credit Suisse:
Unless the CDO market makes a comeback, the bonus arrangements at Credit Suisse are particularly unappealing. The bonus pool at the bank was down around 60% this year and CS is paying 70-80% of all bonuses for directors and MDs out of its stash of toxic assets. Recipients will be exposed to the first 15% of any losses and payments will only start after five years. In the meantime, recipients will receive a dividend of 2.5% over LIBOR, which can be recouped if they try to escape. The only upside will come if toxic assets are priced so low that they’ve appreciated in value in five years’ time. Many CS bankers may not hang around to find out.
RBS bonuses weren’t looking particularly generous when we first ran this ranking and they’ve deteriorated further since.
Under its new bonus arrangements, RBS is only paying 175m in immediately accessible cash bonuses, and that’s only going to people with guarantees. All those without guarantees are being paid in deferred subordinated debt, released in three installments from June 2010. The deferred awards can be clawed back in the event of losses related to an individual’s ‘activities’ and are said to total 600m.
Dresdner Kleinwort Commerzbank:
Like RBS, Commerzbank has indicated that it won’t be paying cash bonuses unless they’re guaranteed. However, unlike RBS which is at least paying something in deferred stock, Commerzbank seems to be paying nothing at all to people without guarantees. 250 Dresdner bankers are said to be suing Commerzbank as a result.