* Flat to down describes much of 2010 bonus season so far
* Promised guarantee payouts frustrating others
* More stock, cash split up, deferred over a few years
By Michael Flaherty
HONG KONG, Jan 28 With bonuses now in hand,
investment bankers across the industry are feeling the sting of a
new compensation climate and showing frustration with the size
and structure of the payouts.
The 2010 bonuses so far are shaping up as flat to lower on
average, with cash payments being broken up and deferred, and
more stock added for veterans, according to a dozen bankers
interviewed by Reuters.
"If you had a good year, you were flat in terms of bonus,"
said a J.P. Morgan (JPM.N) banker, speaking about his division.
"If you had a so-so year, you were down."
High up on the list of grievances is the view that a
significant portion of the bonus pool was sucked into the pot of
money needed to pay guaranteed packages. Or, in other words,
contracts that granted incoming or top bankers millions of
dollars a year over several years no matter how they performed.
"Our bonuses were lower because the money went to
guarantees," said one Hong Kong-based private wealth banker.
Banks such as Barclays (BARC.L), Bank of America (BAC.N) and
Deutsche Bank (DBKGn.DE) were among the financial groups that
attracted top talent last year, especially in the fast growing
Asia market, offering guarantees to poach experienced bankers,
according to recruiters and people inside the banks.
Banks who offer guarantees argue it's critical to attracting
talent. But bankers not on guarantees who had a good year feel
they are paying the price for those on pre-packaged deals.
The private wealth banker said he we was disappointed with
his pay, because he felt it didn't reflect his performance.
"I had my best year ever," said the banker, who is not on a
guarantee. Bankers probably often say that, but unlike early
2009, when the industry knew pay would drop, the latest bonus
round sentiment seems to be a mixture of understanding,
disappointment, and anger.
One investment banker in Singapore said he saw some
colleagues storm out of the office, and not return the day
bonuses were announced. Frustration levels may be higher in Asia,
which although produces a smaller portion of the global fee pool,
grew in almost every category.
However some bankers have pointed out that while Asia staff
may feel slighted, there have been plenty of years where the U.S.
and Europe carried the weight.
"I think generally people were okay with the numbers, but
it's the structure that some of us are having a hard time with,"
said a senior banker at Credit Suisse. Credit Suisse publicly
announced that it will defer more of its staff bonuses and will
reduce cash payouts. [ID:nLDE70904I]
All banks mentioned in the story declined to comment.
BREAKINGVIEWS on reality check on bonuses [ID:nN09150259]
FACTBOX on investment bank [ID:nTOE70N05U]
BREAKINGVIEWS on RBS bonuses [ID:nLDE6BK0LC]
ANALYSIS on pay discrepancy at banks [ID:nL3E7CO0D8]
What changed this year is that even during average years for
a bank, the bonus payout was able to make its way into the hands
of people across the entire institution. Instead, this was the
year of what some called the "donut bonus", or a bonus of zero.
There were other changes as well.
"The big difference this year was that they doubled the
amount of cash they withheld from my bonus," said one executive
director. "Few people are going to shed a tear for a banker. But
when you have a good year, and you're used to getting a certain
amount, it's created a bit of a liquidity issue for people here
who own homes, have kids."
Last year and prior to the 2008 credit crisis, investment
bankers could usually earn around half their bonus in cash, the
rest in stock.
For a managing director, that could mean earning a $250,000
salary throughout the year, and a year-end bonus of $1 million,
broken up in cash and stock. That is changing.
A junior banker at Bank of America said senior bankers there
got bonuses in varying proportions--the more senior the higher
the stock component. This individual said he got 70 percent cash
and 30 percent stock with a one year vesting period. Junior
bankers are usually paid much less than senior ones, which is why
they take more bonus cash.
A Goldman Sachs (GS.N) managing director said that getting an
overall assessment of bonuses at a bank is very difficult.
But he added that head count at the bank was up, in a year
that was not very good for the industry.
"You have to protect the stars who are a flight risk," he
said, meaning that a smaller bonus pool rewarding the top ranks
would naturally mean less for others.
(Additional reporting by Prakash Chakravarti and Stephen
Aldred in HONG KONG; Dan Wilchins in NEW YORK; Editing by Lincoln