Citi guarantees bonuses for London hires

NEW YORK (Reuters) - Citigroup Inc, a U.S. bank that has received $45 billion from taxpayers since October, is paying multimillion-dollar guaranteed bonuses for salesmen and traders it has hired in London, people familiar with the matter said.

Staff enter the Citigroup building in London's financial district of Canary Wharf November 18, 2008. REUTERS/Kevin Coombs

The bonuses in London will be largely in cash, some as high as $2 million to $3 million, and a senior Citigroup trader in New York told a recruiter he was willing to hire with cash bonuses in the United States, the recruiter said, asking not to be identified because of a client confidentiality agreement.

Banks have long handed out guaranteed bonuses to attract talented traders and salesmen, but the practice may draw scrutiny at Citigroup which, like Bank of America, has received the largest capital injection from the government of any U.S. bank.

“A guaranteed bonus is an oxymoron -- a bonus should only be given for superior performance,” said Richard Ferlauto, director of corporate governance and pension investment for the American Federation of State, County and Municipal Employees. “Particularly given the precarious situation that Citi is in, folks shouldn’t be rewarded until they create additional shareholder value.”

Four recruiters said Citi has offered the guarantees to new hires in London, including Stefanos Bitzakidis, head of global equity exotics trading at Morgan Stanley; Rachel Lord, head of European corporate equity derivatives at Morgan Stanley; and Andrew Thompson, European head of equity sales trading at Merrill Lynch, all set to take up similar roles at Citi.

Not every recruiter spoke to each of those three, but guaranteed bonuses were confirmed by at least two recruiters for each person. None of the three new hires could be reached for comment and the recruiters declined to be named because of client confidentiality agreements.

“At this time, it is essential that Citi be able to recruit and retain personnel critical to revenue generation in our businesses that will help return the company to profitability,” Michael Hanretta, Citi spokesman said.

“There is still intense competition for the best talent around the globe and we offer competitive compensation in line with industry best practices,” he added.

Late last month, the government said it would boost its equity stake in Citi to as much as 36 percent, after the bank received $45 billion in taxpayer money and a backstop to cap losses on a $300.8 billion of toxic assets last year.

The capital Citi has received through the government’s Troubled Asset Relief Program (TARP) is not used for compensation or bonuses, the bank said in a February report on the use of the government funds.

“Paying guaranteed bonuses in this environment is more of a minority practice .... I think it will attract some scrutiny,” said Joe Sorrentino, managing director at compensation consultant Steven Hall & Partners, noting that he does not know the particulars of Citigroup’s compensation practices.

“But from the company’s perspective, if they are ever going to be able to pay back the government, they have to have viable businesses and for that they need qualified people,” he added.

Goldman Sachs occasionally offers a one-year guaranteed bonus, largely in stock that does not vest for a further year, a spokesman said. A JPMorgan Chase & Co spokesman declined comment, and spokesmen for Bank of America Corp and Morgan Stanley did not immediately comment.


Shortly after the TARP began, lawmakers began asking questions about what was happening to the money being injected into banks by the Treasury Department.

Perks such as use of a corporate jet, and lavish events held for staff or clients came under scrutiny.

Citigroup in January scrapped plans to buy a $50 million jet after politicians called it wasteful. Wells Fargo & Co has canceled employee outings at pricey Las Vegas casinos that it had held for years, while Goldman Sachs moved a client conference from Florida to New York.

The government approved pay curbs for top executives and the top 20 employees at banks that have received more than $500 million under the TARP.

Chief Executive Vikram Pandit told Congress last month that he will receive a salary of $1 with no bonus until the bank returns to profitability. “I get the new reality and I will make sure Citigroup gets it as well,” he told lawmakers.

Citigroup has recorded more than $80 billion in writedowns and credit losses since the financial crisis began 18 months ago and it laid off some 50,000 employees in 2008.

Reporting by Elinor Comlay; editing by Richard Chang