Will the Bonus Pool Shrink at Lehman?

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This year has been a prosperous one for investment banks, but fourth quarter results at Lehman Brothers suggest some sluggishness. Will the bank slim down its bonus payouts as a result?

While Lehman broke full-year records - net revenues jumped almost 25% on 2004 to $14.6bn, and net profits leapt 38% to $3.3bn - sequentially the year ended on a bum note, with earnings down 6% on the third quarter and revenues down 4%.

The culprit was fixed income trading, where Q4 revenues plummeted 14%. With interest rates set to rise, conditions here could get worse in 2006. The question therefore is, will Lehman pay out bumper bonuses anyway? And will other fixed income-focused banks - like Deutsche Bank - suffer similarly? It's your call. Let us know what you think.

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