Commercial Banking Compensation Under Pressure

While the state of commercial lending varies between regions and sectors, the consolidation of large banks and a decline in loan opportunities is pressuring overall compensation in the field.

"Across the country there are fewer large institutions, so there are fewer new opportunities, especially in the near-term," says Gregg Carlson, president of Carlson Search Group, a retained executive search firm in West Des Moines, Iowa, that specializes in the financial services industry. "More people are chasing fewer opportunities, and that may have a significant impact on overall compensation going forward."

Salaries and Bonuses Under Pressure

Regardless what happens in the future, this year's compensation situation looks bleak. One commercial lender in New York, who spoke on condition of anonymity, says "no one is expecting much of a bonus, if any." In the midst of Wall Street's turmoil, she adds, there is "no communication" about when compensation might be announced, at least at the leading bank at which she works.

"While year-end bonuses have not yet been determined, commercial banking executives around the country are trying to figure out how to handle compensation issues," Carlson points out. Bonuses in commercial banking tend to be based on a combination of company, unit and individual performance, and in many cases firms and divisions have not met targeted goals.

"Where banks have been hit hard, there won't be much of a bonus pool to draw from," observes Doug Rickart, division director at Robert Half Financial Services Group.

While compensation varies depending on the size of the bank, the region, the "pay philosophy of the bank," and the producer's experience level, a typical base salary might fall between $90,000 and $150,000 with bonus potential ranging from 20 percent to 50 percent of that base, according to Carlson. Salaries and bonus opportunities may be higher in major metropolitan markets or in leading banks.

Unfortunately, "when (bankers) aren't making loans, you'll generally see no bonus or a bonus on the lower end of the scale," says Carlson.

Rickart has seen a "meaningful increases in base salaries" in recent years for the industry. Now, he forecasts those bases "will probably shrink" in some cases.

Regional Differences

Compensation for the near future will depend on both the region and industry a commercial lender covers. Both Rickart and Carlson confirm the Midwest has generally been more insulated than the coasts, where real estate problems have been the most devastating to local and state economies.

If you're in a smaller town or in a region where there is still some economic stability, "there will be some bonus money," says Carlson, although he points out that in smaller markets, total compensation hasn't been as high as in larger metropolitan areas to begin with.

The New York City banker voiced a darker view on the situation at major institutions: "We're just wondering if our companies will still be in business from day to day."

Focus on Individual Contributors

Both Carlson and Rickart predict banks will concentrate what bonus funds they have on rewarding and retaining top individual performers. "Most companies will work hard to hang onto great people," says Carlson. "Even during times like this, great talent rules the day." On the other hand - militating against any inclination of employers to reward those they wish to keep - Carlson suggests that today, top performers may be less inclined to leave even if recruited by a competitor.

For leading producers who've been laid off as a result of a failing institution or merger, opportunities still exist. Carlson predicts that healthier banks will use the downturn as an opportunity to recruit the top performers they otherwise have been unable to attract.

For those who still have jobs at strong institutions, job security will be the paramount concern. Carlson predicts those who have employment won't be fighting for bigger bonuses. "We'll be seeing people happy to have jobs," he says.