With record profits on Wall Street, small bonuses will
annoy bankers: experts
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[January 22, 2020] By
Scott Murdoch, Elizabeth Dilts Marshall and Imani Moise
NEW YORK (Reuters) - Most Wall Street banks
announced their fourth quarter profits beat industry expectations last
week. But by the end of this week, bank sources and compensation experts
told Reuters, most of their staff will be underwhelmed by their bonuses.
Many dealmakers, traders and even one big bank CEO are getting
flat-to-down bonuses and total compensation for their performance in
2019 even though overall profits grew, the sources and experts said.
Morgan Stanley <MS.N> reduced incentive compensation for staff and cut
Chief Executive Officer James Gorman's total compensation by 7% for last
year compared to 2018, as the bank worked to reduce expenses, which
climbed in the fourth quarter.(https://reut.rs/2NylFio)
![](http://archives.lincolndailynews.com/2020/Jan/22/images/ads/current/werth_lda_LUAL_2019.png)
Last week and throughout this week, managers at Goldman Sachs Group Inc
<GS.N>, Bank of America Corp <BAC.N> Citigroup Inc <C.N>, and JPMorgan
Chase & Co <JPM.N> are getting similar news, sources said. All five
banks declined to comment.
With M&A revenue down significantly and underwriting and trading results
spotty across different banks, many employees will be disappointed by
the size of their bonuses. Bond trading businesses performed well
compared with a bad year-ago quarter, but that may not spell big
paychecks for those traders.
"Markets can go up, earnings can go up, but that doesn't mean pay has to
go up," said Alan Johnson, who advises financial firms on pay. He
expects bonuses to be flat at best for most Wall Street workers.
Many have gotten used to this dynamic on Wall Street.
Since the financial crisis, banks have automated lots of functions that
previously needed skilled professionals — from executing big blocks of
equities trades to figuring out which corporations to target for
investment banking services. (https://reut.rs/2NIAwEg) (http://reut.rs/2nclxVR)
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![](../images/012220pics/busine29.jpg)
Traders work on the floor at the New York Stock Exchange (NYSE) in
New York, U.S., January 13, 2020. REUTERS/Brendan McDermid
![](http://archives.lincolndailynews.com/2020/Jan/22/images/ads/current/peasley%20lda%20080907.png)
They have also shifted focus to steadier businesses, like managing wealth,
handling corporate cash, processing transactions and expanding basic loan books.
Hiring is now centered around new technologies or high-margin businesses that do
not require much capital. "Front-office" employees in market-sensitive
businesses like trading, dealmaking and underwriting know their bonuses can be
unreliable, and their jobs uncertain.
After years of underwhelming bonuses, some bankers have left or say they are
considering leaving for private equity and other types of investment companies
that pay more and are not subject to the same restrictions as banks.
"There's going to be a lot of conversations happening right now" with
recruiters, said one frustrated Morgan Stanley banker. "The stock is up... and
they've crimped everyone's pay for the year."
Morgan Stanley let go of 1,500 employees in the fourth quarter, mostly in
investment banking and trading, and the cost of those employees' severance
packages was another reason the bank sought to reduce expenses.
While some are disappointed by their bonuses, many admit they are still richly
rewarded. Morgan Stanley's CEO Gorman's total pay for 2019 was $27 million,
compared to $29 million in 2018.
![](http://archives.lincolndailynews.com/2020/Jan/22/images/ads/current/cca_laptop-sda021709.png)
"No one is expecting a windfall this year," a source at one big bank said on
condition of anonymity because he does not have permission to discuss bonuses
with media. "But a bonus is just that -- a bonus."
(Reporting By Scott Murdoch, Imani Moise and Elizabeth Dilts Marshall; Editing
by David Gregorio)
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