It began with Goldman Sachs, and so it goes on. 2019 is turning out to the year of bonus cuts.
Barclays and UBS have both reported their quarterly results this morning. After Credit Suisse cut bankers' bonuses yesterday, it should come as no surprise that both UBS and Barclays appear to be doing the same.
In the presentation accompanying its results, Barclays says it cut costs in its corporate and investment bank (CIB) by 9% due to, "lower variable compensation accruals, reflecting lower income." UBS is boasting that it cut bonuses across the bank by CHF372m in the first quarter, while it cut compensation spending in the investment bank specifically by 26% compared to the first quarter of 2018.
It doesn't take a genius to see why. As the chart below shows, there have been a lot of banking businesses with a lot of 'negative growth' (i.e. shrinkage) in the first quarter of 2019 compared to the same quarter a year earlier. This might be because the first quarter of last year was abnormally strong, or it might be because banks are not taking any chances and are cutting their cloth in preparation for what looks like a stony path ahead.
This applies especially to Barclays, which is under pressure to increase returns in its investment bank, but instead saw the CIB's return on tangible equity fall from 13.5% a year earlier to 9.5% in Q1 2019.
There are some bright spots. Both Barclays and UBS saw (negligible) growth in fixed income currencies and commodities (FICC) trading, with both highlighting the fine performance of their rates traders in particular. However, everywhere else was a disaster.
If this continues, bonus cuts may just be the beginning. 2019 could be a year of big redundancies.