- Plans could be adjusted depending on December trading results
- `Flat is the new up,' Options Group CEO says as banks cut pay
JPMorgan Chase & Co., the world’s biggest investment bank by revenue, is leaving its bonus pool roughly unchanged from 2014, adding to pressure on weakened rivals, according to people with knowledge of the plan.
The bank told top managers about its initial decision this month as desks prepare for year-end pay discussions with employees, said the people, asking not to be identified talking about personnel matters. While JPMorgan’s plan may yet change depending on trading performance in December, its push to preserve the pool bucks the trend at European competitors including Deutsche Bank AG, which is preparing to cut payouts.
“Flat is the new up,” said Michael Karp, chief executive officer of recruitment firm Options Group Inc. It’s a feat for any bank to maintain its pool amid elevated costs from compliance and new regulations, he said. “Equities and investment banking will be subsidizing fixed-income bonuses this year.”
JPMorgan, led by CEO Jamie Dimon, has stuck to its global banking model as European rivals scale back businesses and slash expenses in the face of regulations that make trading less profitable. Compensation at the New York-based firm’s corporate and investment bank consumed 30 percent of the division’s revenue last year, a ratio that remained steady over the past five years. Revenue during the first nine months of 2015 slid 2.7 percent to $26.5 billion from a year earlier, outpacing a 2 percent drop companywide.
Deutsche Bank, Europe’s biggest investment bank, may cut its bonus pool this year by 500 million euros ($529 million), or almost a third, as co-CEO John Cryan streamlines the business, people with knowledge of the matter said last month. Credit Suisse Group AG, Switzerland’s second-biggest lender, plans to cut its pool by as much as 60 percent, and some bankers at Barclays Plc may not get any bonus this year, London’s Sunday Times reported this week, citing unidentified sources.
A firm’s bonus pool represents its total allocation for incentive pay, and compensation for individuals differs by their performance and that of the trading desks they work on. Equities traders globally will probably see an average 8 percent jump in pay this year, led by derivatives and electronic trading units, according to an Options Group report. Investment bankers may get 5 percent more. Fixed-income traders face a 4 percent drop, driven by declines among securitized product and credit teams.
JPMorgan’s total compensation costs for 2014, which include salaries and benefits, were $10.4 billion, a 3.6 percent decline from the previous year. The trading and banking division had 49,384 employees as of Sept. 30, about 4 percent fewer than a year earlier. Brian Marchiony, a JPMorgan spokesman, declined to comment on compensation.
A particularly strong or bad trading environment in December can cause banks to adjust their bonus pools. At the end of last year, a poor performance led Citigroup Inc. to cut its bonus pool for traders and salesmen after planning to keep it roughly flat.