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JPMorgan Shrinks Compensation Pool 7% at Investment-Bank Unit

“We really believe in pay for performance,” Mike Cavanagh, co-head of JPMorgan’s corporate and investment bank, told shareholders in February.Photographer: Scott Eells/Bloomberg
“We really believe in pay for performance,” Mike Cavanagh, co-head of JPMorgan’s corporate and investment bank, told shareholders in February.Photographer: Scott Eells/Bloomberg

April 12 (Bloomberg) -- JPMorgan Chase & Co.’s corporate and investment bank set aside 7 percent less money for employee compensation in the first quarter while the division generated 9 percent more revenue.

The unit's $3.38 billion in compensation costs amounted to 34 percent of revenue, excluding accounting adjustments, down from 35 percent a year earlier, according to figures posted today on the New York-based firm’s website. The pay pool is large enough to give each of the division’s 51,634 employees $65,383 for the three months.

Investment banks have faced pressure to cut costs as revenue from trading, advisory and underwriting at the nine largest global firms fell almost 10 percent from 2010 through 2012. Executives have sought to lower compensation-to-revenue ratios while retaining top bankers and traders.

“We really believe in pay for performance,” Mike Cavanagh, co-head of JPMorgan’s corporate and investment bank, told shareholders in February. The bank’s scale can help it keep that ratio low while offering top employees pay that’s at least as good as “anybody else in our industry,” he said.

JPMorgan combined its investment bank with the firm’s corporate bank and treasury and securities-services units last year, and put Cavanagh and Daniel Pinto in charge of the division. The group has more than twice as many employees as the investment bank.

The amount set aside for compensation includes salaries, bonuses, benefits and the cost of deferred pay from previous years. Figures for average pay don’t represent what individuals actually receive and are calculated by dividing the total compensation expense by the number of employees.

To contact the reporter on this story: Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net

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