The proportion of investment bankers who got no bonuses last year more than doubled to about 14 percent, a poll by executive-search firm Options Group shows.
The percentage of employees who weren’t given an annual award rose from 6 percent in 2010, the New York-based company said in a report yesterday. Getting no bonus, or being “blanked” by your employer, isn’t the smear it once was because base salaries increased after the 2008 financial crisis, said Michael Karp, managing partner of Options Group.
“People aren’t complaining about it as much as they would have if this were 2007,” Karp said in a telephone interview. “As compensation shifted, the mentality of people has become more limber. Also, these are times you can’t just quit and expect two offers right away.”
Wall Street firms are cutting costs and vowing to claw back some payments as they succumb to revenue and regulatory pressures. Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) trimmed pay and reduced positions this year. More cuts may come as the European debt crisis dims the industry’s prospects, Karp said.
KPMG LLP’s Banking Outlook Survey released today showed 43 percent of the firms surveyed expect management will spend most of its time and energy on promoting efficiency and cutting costs for the next two years. Almost one-third of the 100 executives expect they’ll cut headcount, KPMG said.
Options Group compiled data from about 1,300 workers worldwide in areas including fixed income, equities, investment banking and research. As many as half of those interviewed were paid less in 2011 than the year before, and those who got increases were mostly junior workers, at the vice-president level or below, according to the report.
Top earners received more of their pay in deferred units, with about 80 percent delayed for those whose total compensation reached $3 million, compared with about half for those who make $1 million, according to the report.
“Firms are trying their best to reduce costs,” Karp said. “There’s uncertainty in the market, revenues aren’t being generated. Looking at what’s happening in Europe, all indications are for a tough next six months.”
Financial firms in the U.K. have been under pressure from regulators and governments to cut pay due to public anger about taxpayer assistance to banks, including Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc. RBS Chief Executive Officer Stephen Hester this year waived his 963,000-pound ($1.49 million) bonus after the opposition Labour Party said it would ask Parliament to vote on the award.
Investment banking revenue may fall 24 percent in the second quarter as the effect of the European Central Bank’s 1 trillion euros ($1.25 trillion) of loans to the banking system wears off, JPMorgan analysts said in a report last month. Revenue from fixed income, currencies and commodities trading may fall 32 percent, while income from equities may drop 14 percent from the first quarter, the analysts said.
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