Citigroup Inc. traders will be spared the full pinch of this year’s market slump, while investment bankers won’t get bonus boosts as big as their surge in dealmaking.
The year-end bonus pool for the bank’s trading business will be unchanged from 2013, according to a person briefed on the matter, even though revenue has been sliding. The investment-banking division will increase rewards by 2 percent to 3 percent, short of its jump in revenue, the person said.
Some bankers may see increases of as much as 5 percent, said the person, who asked not to be identified because the information hasn’t been disclosed publicly. Some traders may yet see cuts as payouts vary among desks focusing on different products, said another person. Investment-banking revenue rose 11 percent during the first nine months of 2014, while trading revenue slumped 9 percent, compared with a year earlier. Robert Julavits, a bank spokesman, declined to comment.
Chief Executive Officer Michael Corbat, 54, is under pressure to limit compensation costs as he heads into next year, when he must show investors the bank can meet efficiency goals. For employees, that means continued restraint: A year ago, payouts for Citigroup’s bankers were said to be little changed, while traders and salespeople got cuts of 2 percent.
Corbat said last week that trading revenue probably would decline 5 percent in the fourth quarter from the final three months of 2013. He didn’t provide a revenue update for investment banking.
Wall Street focuses on bonuses this month as managers survey the year’s performance and give employees a sense of how well they’ve done. While markets lulled by Federal Reserve intervention have crimped trading, investment bankers fared better amid a surge in mergers and issuance of debt and stock.
Corbat took over as CEO in October of 2012 with a focus on controlling costs to boost profitability. During a presentation in March last year, he said that Citicorp, the division holding ongoing businesses such as consumer banking and trading, should be able to lower its efficiency ratio to the “mid-50 percent” range by 2015 from about 60 percent in 2012.
Earlier this month he predicted the lender will report $2.7 billion in quarterly legal expenses, the most since he became CEO, as authorities seek to resolve probes into allegations that traders at firms including Citigroup rigged the $5.3 trillion-a-day currency market. That and other costs will leave the bank “marginally profitable” in the year’s final three months, he said.
Morgan Stanley said in a Dec. 5 filing that it will give employees a greater portion of their bonuses up front, with the board’s compensation committee agreeing to defer future bonus pools at an average rate of 50 percent, down from about 80 percent last year, according to a regulatory filing.