LONDON/NEW YORK: Self-confidence and betting on long odds are part of their DNA and so, while expecting the financial industry to slash bonuses this year, many bankers think it will not happen to them.
They’re in for a shock. After a year of scandals, job cuts and shaky markets, senior managers and consultants contacted by Reuters warn bonus pools at top banks could shrink by up to 30 percent from last year.
And that’s not to mention the pressure from regulators for pay restraint and, in Europe at least, the risk of a backlash from politicians and the public if an industry which many blame for a new era of austerity were to reward itself generously. The result will be more zero bonuses, dubbed “doughnuts”, than ever before as banks become more selective at separating revenue-makers from the merely mediocre.
Yet, while luxury goods companies and high-end clubs and restaurants are bracing for a drop in big spenders, the bonus culture is so ingrained in the glass towers of global finance that many bankers are still pinning their hopes on a big payout. “It’s going to be a rubbish year. But everyone secretly does hope - or think - they might be OK,” said one London investment banker, speaking on condition of anonymity.
More than 80 percent of workers in the City of London finance district expect a bonus for 2012, with almost half saying it will likely be higher than last year, a survey by eFinancialCareers showed in October. Its survey for Wall Street yielded similar results. Goldman Sachs hasn’t helped to curb expectations by setting aside 10 percent more money for compensation in the nine months to September than in a very strained 2011.
“Bonuses are going to be worse than people assume,” said the head of a financial practice at a top US headhunter. The total amount put aside for pay and bonuses so far this year by eight top international investment banks, including JPMorgan and Deutsche Bank, is already down 7 percent on average from 2011 levels and has fallen further than revenues, third quarter results showed.
A new group of chief executives is also likely to lead from the front. Barclays’ boss Antony Jenkins, who has called for a change in culture at banks, will be keen to avoid the headlines attracted by his predecessor Bob Diamond’s £17m pay package last year. Deutsche Bank co-CEO Anshu Jain, who earned almost $13m in total pay in 2011 when he was the investment bank boss, is also likely to take home less as he spearheads a move to cut pay across the firm.
In an industry which has unveiled plans for close to 160,000 layoffs since last year, just holding down a job is an achievement. But for those bankers still in work, the years since the 2008 financial market crisis have not been all bad. Base pay has doubled for some compared to pre-2008 levels, to make up for a drop in the cash bankers get in their bonuses.
Reuters
