Bloomberg: Wall Street Damps Pay Expectations After 2011 Bonus Shock

Bloomberg: Wall Street Damps Pay Expectations After 2011 Bonus Shock

November 29 2012

By Michael J. Moore 


Wall Street banks are deflating pay expectations to avoid a replay of last year when cutbacks on bonuses and increased deferrals surprised bankers and traders.

Traders’ Pay

Total pay for investment bankers and traders industrywide probably will fall 8 percent, according to the Options Group report. Traders in fixed-income businesses can expect to see a 6 percent increase in compensation, while pay may decline 17 percent in equities and 13 percent in investment banking, the report shows.

Credit traders in loan products with the title of vice president, the third-highest at most banks, probably will receive compensation averaging $800,000 this year, up from $720,000 for 2011, according to the report. Cash-equity traders with the same title may get $290,000, down from $370,000.

Employees were stunned by the 2011 bonuses in part because some banks changed their pay structure, said Joseph Sorrentino, a managing director at New York compensation-consulting firm Steven Hall & Partners. Morgan Stanley capped cash bonuses at $125,000, while Barclays Plc (BARC) limited them to 65,000 pounds ($103,000). Credit Suisse paid employees a portion of last year’s bonuses in bonds made from derivatives to help the Zurich-based company cut risk and improve its capital position.

More Palatable

Wall Street banks probably won’t make changes to the structure of bonuses on the scale they did last year, Steven Hall’s Sorrentino said. While that will make pay packages more palatable, it also means employees will continue to get less cash than before the financial crisis, he said.

“Most of the changes have been made already in terms of lengthening vesting, holding back some pay in the form of deferrals and stock and the continued use of clawbacks,” Sorrentino said. “A couple years ago, if I told you your comp was $100, you got $100. Now, it’s $50 in your pocket and $50 if you’re here in three or five years.”

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