Unfortunately, 2010 compensation is on track to fall 20%, at least
2010 compensation is being assailed not only by Arlene McCarthy, but by the fact that the year isn't panning out very well.
Analysts at Nomura calculate that once one-off items and allowances for the changing value of banks' own debt are deducted, overall banking revenues were down around 39% year-on-year in the second quarter across JPM, BAC, Citi, GS and MS.
Given that pay is calculated as a percentage of revenues, and given that banks are endeavouring to reduce their compensation ratios, this is having a negative effect on pay.
Across the three banks (Goldman Sachs, Morgan Stanley and Credit Suisse), which break out investment banking compensation and headcount, accrued compensation per head is down an average of 20% y-o-y in the first half.
The biggest reduction so far is at Credit Suisse (down 30% in CHF). Morgan Stanley doesn't differentiate pay for its investment bankers, but the compensation ratio at the institutional securities division has fallen to a modest 28.5% once the bonus tax is excluded, according to Mark Lane, analyst at William Blair & Company.
Goldman Sachs
Compensation per head 2010 versus 2009 (US$): $273k vs. $364k.
% change: -25%
JPMorgan investment bank
Compensation per head 2010 versus 2009 (US$): $223k vs. $233k
% change: -4.4%
Credit Suisse investment bank
Compensation per head 2010 versus 2009 (US$): $202k (CHF 211k) vs $289k (CHF301k)
% change: -30%
