Citigroup Inc., the third-largest U.S. bank, cut investment bankers’ bonuses by 10 percent to 20 percent globally after a revenue slump, according to people with knowledge of the matter.
Average bonuses in Asian and European divisions dropped about 20 percent and the U.S., its largest market, saw reductions of about 10 percent, one person said, declining to be named because the details aren’t public. Staff members of the New York-based company were informed yesterday, two people said.
New Citigroup Chief Executive Officer Michael Corbat is among global banking leaders who are cutting bonuses as slow economic growth squeezes revenue and European lawmakers put curbs on compensation. Profit at the lender’s securities and banking unit slumped 10 percent in 2012.
“We need to show expense discipline and that we can be smarter allocators of our resources,” Corbat told analysts yesterday. “Improving our operating efficiency, returns on assets, and tangible equity in a risk-balanced manner and returning capital to our shareholders are critical goals.”
Bankers up to the vice-president level were given unchanged or higher bonuses while senior bankers saw bonus pools drop, one person said, asking not to be named because the details aren’t public. Top performers probably would be spared, people briefed on the matter said in November.
Equities-trading bonuses at the bank were down by about 10 percent and bonuses for the fixed-income division ranged from 10 percent higher to 10 percent lower, one person said.
Revenue slumped 11 percent to $6.42 billion in 2012 at Citigroup’s European securities and banking division, which includes operations in the Middle East and Africa, the company said yesterday. Profit from continuing operations at the unit, which includes investment banking and trading, tumbled 32 percent to $1.35 billion.
European and U.K. taxpayers still haven’t been reimbursed for bailing out firms such as Royal Bank of Scotland Group Plc and the region’s lenders face further losses amid rate-rigging and money-laundering scandals. As a result, policy makers are capping bonuses and forcing banks to defer more compensation and claw back pay.
Deutsche Bank AG, the biggest German lender, may cut average bonuses for European investment bankers by as much as 20 percent for 2012, while bankers in New York will see smaller declines, four people briefed on the matter said on Jan. 14.
The lender’s co-CEO Anshu Jain, at a conference in London in September, called on investors to demand other firms follow Franfurt-based Deutsche Bank’s change in compensation policies.
“We have taken a bigger first step than most of our competitors,” he said. “Is there a risk that our competition doesn’t follow suit? Only if you are willing to accept low ROEs with unchanged compensation practices elsewhere.”
Other lenders that disclosed 2012 pay include JPMorgan Chase & Co., the biggest U.S. bank, which cut corporate and investment bank compensation by 3 percent in 2012 to $11.3 billion as the division generated 1 percent more revenue.
Goldman Sachs Group Inc., the fifth-biggest U.S. bank, boosted compensation expenses 6 percent in 2012 to $12.9 billion, the first increase in three years, according to a statement. The New York-based firm raised CEO Lloyd C. Blankfein’s stock bonus by 90 percent to $13.3 million.
Morgan Stanley, the sixth-biggest U.S. bank, cut its investment bank compensation pool by 8 percent and is deferring all bonuses for about a fifth of its employees.
At Citigroup, revenue and profit at the securities and banking division fell outside of Europe as well. The Asian unit posted annual revenue of $4.2 billion, down 2 percent from 2011. Profit from continuing operations fell 8 percent to $822 million. Jamie Forese, appointed Citigroup co-president earlier this month, oversees the securities and banking unit.
Revenue at the North American division fell more than any other location, tumbling 19 percent to $6.14 billion for the year, according to a financial supplement. Profit fell 3 percent to $1.01 billion.
Danielle Romero-Apsilos, a spokeswoman for Citigroup, declined to comment.