World's bankers brace for 7pc drop in bonuses
London, December 22, 2010
From Wall Street to the City of London to Hong Kong's Central District, bankers are bracing for bonuses to be down 7 percent on average from a year ago, and higher salaries will only partially cushion the hit, a Reuters/IFR global poll shows.
Some finance industry professionals are expecting drops as steep as 30 percent after weak trading results that are depressing bank profits and shrinking the bonus pool, according to the poll of more than 25 professionals.
Unlike in other industries, bankers typically rely on year-end bonuses for a large portion of their yearly compensation.
Although most banks have not yet informed staff of their actual bonuses for 2010, the dismal expectations reflect the fact that generally bankers, traders, and salespeople have been told to be ready for a low payout.
One US banker said: "Even if you're a star performer you're going to be down."
This is a sharp turnaround from last year, when Wall Street bonuses jumped 17 percent on average, according to a report by New York State's comptroller.
The findings from the Reuters/IFR poll are in line with executive search industry reports.
The poll pointed to heftier payouts in Asia, where business is booming, and to flat-to-smaller bonus pools for European and United States bankers.
Bonuses may not be strong, but bankers are receiving higher salaries, which reduces the hit to total income. Many banks have boosted salaries this year on the theory that concentrating compensation into sky-high year-end bonuses encourages reckless risk-taking. Some salaries have doubled, according to compensation consultants.
Even so, bonuses still typically account for about 80 percent of top-level employees' compensation, said Joe Sorrentino, compensation consultant at Steven Hall & Partners in New York.
Banks' revenues have been pressured this year by weaker trading volumes. The one bright spot has been merger advisory, where volumes have risen from last year, but where profits are typically low compared with trading. - Reuters