Less than stellar bonuses from universal banks

Citigroup, JP Morgan and Merrill Lynch announced bonuses last week. Rumour has it there were plenty of disappointed faces.

While Merrill is said to have paid quite well, it seems Citigroup and JP Morgan were the bearers of bad news, particularly in areas like credit derivatives and equities.

Despite the bank more than tripling 2005 profits in its corporate and investment banking division, some back office and middle office staff in Citigroup's credit derivatives team saw bonuses fall more than 50% vs. 2004. Headhunters said JP Morgan's cash equity traders also suffered following bad trades early in the year and a 17% drop in fourth quarter trading revenues.

Joe McCann, managing director of US search firm McCann & Co., says both banks are gaining a reputation as poor payers. "JP Morgan, Citigroup, and increasingly Morgan Stanley, are not willing to compensate their top performers," he says. "They take the attitude that their people are doing well because they're part of their platform, and therefore they don't need to pay them properly."

Vanessa Coleman, managing director of London-based back and middle office search firm Coleman Parker, says Citigroup was parsimonious with its back office staff in 2005, and seemed to have repeated this performance. "There are a couple of places with disappointed staff this year," she said. "There's been a real problem with expectations management."

Not everyone adhered to the notion of penny-pinching at Citigroup, however. One London search consultant specialising in corporate finance says Citigroup's senior bankers saw 'considerable bonus upticks' of 20% or more. But he says those receiving higher payouts were unlikely to shout about it: "Compensation at Citigroup is increasingly pinned on behaviour as well as financial performance. The people who are good team players and good corporate citizens won't be the ones bragging."

Shaun Springer, chief executive officer of London-based fixed income search firm Napier Scott, says Citigroup won't be the only bank paying its credit derivatives staff down this year: "2005 profits from credit derivatives sales and trading are unlikely to have exceeded 2004's, and bonuses will reflect this."

If Springer is right, there will be more long faces at Credit Suisse, which announces bonuses today, to say nothing of UBS, Royal Bank of Scotland, and Barclays Capital which are among those announcing in the next few weeks.