America’s largest lenders are tempering expectations for employee payments after the pandemic that has skyrocketed revenues.
Wall Street traders who have generated windfall gains in banks this year may reap more modest rewards than they initially hoped for.
America’s largest lenders are tempering expectations for employee payments after the global pandemic sparks an avalanche of business activity and spikes in income.
At Bank of America Corp., plans to keep the bonus pool for sales and trades at last year’s level disappointed some staff.
Citigroup Inc. will leave the overall pot unchanged for stocks, while increasing it for bond traders by at least 10%.
More generous increases of nearly 20% are being discussed at JPMorgan Chase & Co. and Goldman Sachs Group Inc., but even within those companies the bonuses will likely vary widely.
“The general tone across the street is somewhat pessimistic,” said Paul Sorbera, president of the executive search firm of Wall Street Alliance Consulting in New York City. “It will be a mess” for managers to make compensation decisions given the uneven performance of different teams this year, he said.
The Reality Check comes amid a global pandemic that has rocked economies and disrupted markets.
As industry executives lock in year-end compensation decisions, they will need to weigh exceptional business performance against the potential for loan losses in consumer and corporate credit divisions.
Banks are also reluctant to make large payments to bankers, which could attract criticism from the public and lawmakers when millions of people are out of work.
Even in this context, companies have made it a priority to reward their shareholders. The six largest U.S. banks will be able to repurchase up to $ 11 billion of their own shares in the first quarter of next year after the Federal Reserve gave the green light to lenders to resume buying.
“We have to be aware of our returns and our shareholders, we have to be aware of our environment in which we find ourselves and the many challenges that face people and certain companies”, Michael, CEO of Citigroup Corbat said in a statement. interview at a Bloomberg event this month. “And at the same time, we have to be competitive. In our industry, we are fortunate to have good talent. And we have to recognize that.
The business divisions have helped fuel some of the profits that will flow back to shareholders.
America’s five largest investment banks are on track for their first year of $ 100 billion in trading revenue in more than a decade. In the first three quarters of the year, they generated nearly $ 84 billion, more than any full year since 2010.
Still, that won’t be enough to lock in the huge bonuses of years past.
“Management is very concerned that people feel like they are going to be paid in proportion to the increase in income,” Sorbera said. “This is not happening.”