Citigroup Bonus Pool for Traders, Bankers Said to Stay Flat

Citigroup, JPM Take Flat Approach to Bank Bonuses
  • Decision is preliminary and hinges on performance in December
  • Senior managers learned of decision on Tuesday, person said

Citigroup Inc., the third-biggest U.S. bank, plans to leave its bonus pool unchanged from 2014, joining JPMorgan Chase & Co. in a move that puts pressure on their weakened rivals in Europe, according to a person briefed on the matter.

Citigroup told senior managers Tuesday about the compensation figures, which may yet change depending on how markets perform in the year’s final month, said the person, who asked not to be identified discussing the deliberations. Heads of trading desks will get a chance to push for more pay in talks during coming weeks, the person said. Rank-and-file employees won’t learn what they’ll get until after December’s holidays.

Maintaining pay is a feat on Wall Street this year -- and a potential advantage in recruiting -- as some of the world’s biggest investment banks shrink businesses and compensation in the face of stiffer capital rules and an extended slump in fixed-income trading. Deutsche Bank AG, Europe’s biggest investment bank, may cut its bonus pool this year by almost a third, people with knowledge of the matter said in October. Morgan Stanley is considering eliminating as much as quarter of its fixed-income trading staff, people with knowledge of the deliberations said this week.

“If you are in the business, you know it’s not exactly robust,” Chad Dean, a managing partner at recruiting firm Integrated Management Resources, said in an interview. “People in these seats should take the same money they got last year and whistle all the way to the bank.”

Cost Control

As others retreat, Citigroup Chief Executive Officer Michael Corbat has been sticking with out-of-favor trading businesses, using the industry’s withdrawal to keep a lid on costs while looking to add market share. Pay absorbed 27 percent of revenue in the institutional clients group, which houses trading and investment-banking businesses, in the 12 months through September, Chief Financial Officer John Gerspach said this quarter. That’s down from 29 percent in 2014. The division’s revenue rose 2.4 percent in this year’s first nine months to $26.5 billion.

Scott Helfman, a spokesman for New York-based Citigroup, declined to comment.

A similar plan didn’t pan out for Citigroup’s workforce last year. After saying in mid-December that it intended to keep the bonus pool roughly flat for 2014, Citigroup ended up cutting total pay for fixed-income and equities traders and salespeople after a lackluster performance in the year’s final weeks.

Mounting Pressure

A firm’s bonus pool represents its total allocation for incentive pay. 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 products and credit teams.

JPMorgan, led by CEO Jamie Dimon, told top managers last month about its initial decision to leave its bonus pool unchanged, people with knowledge of the matter said this week. 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.

With JPMorgan and Citigroup holding pay flat, other firms may now feel pushed to keep their payouts even or risk losing some of their best people, Dean said.

“This will put pressure on other U.S. banks that they need to follow suit,” he said. “All the desks are running lean as it is. You don’t want the risk of losing somebody and having to go out into the market.”

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