JPMorgan Chase Pays Employees Less Per Head in 2011—A Possible Indication of Things to Come at Other Banks

JPMorgan Chase & Co. paid employees of its investment bank an average of $341,552 for 2011—down 7.6 percent from a year earlier, Dow Jones reports.

The largest U.S. bank by assets set aside $8.9 billion in compensation for the business, down 9 percent from the $9.7 billion it allocated a year ago, said the report, noting that J.P. Morgan's compensation figures will be closely watched, since J.P. Morgan is the first big U.S. bank to report quarterly results and may shed light on other investment banks’ payout trends.

Headcount in the investment bank dripped only slightly (1.2 percent) to 25,999 from 26,314 a year earlier, and the unit had 616 fewer employees during fourth quarter 2011 than in the third quarter.

Announcing its fourth-quarter results, J.P. Morgan said its fourth-quarter profit fell a total of 23 percent as both trading revenue and investment banking fees declined, Bloomberg stated, adding that:

“Revenue in every investment banking business fell from a year earlier, including an 18 percent drop in trading. The division’s total revenue fell 30 percent to $4.36 billion as corporate clients stayed on the sidelines on concern Europe’s debt crisis would lead to an economic slowdown."

The drop was much larger than Chief Executive Officer Jamie Dimon had forecast last month, when he said investment banking revenue would be “essentially flat” from the third quarter’s $6.37 billion.

Clearly, the compensation figures are indicative of a difficult period for investment banking related to the European debt crisis and the fact that concerns about the global economy have constrained deal-making activity.

Within the investment bank itself, quarterly profit fell 52 percent to $726 million on a 30 percent drop in revenue. Compensation as a percentage of net revenue for the investment bank was 34 percent for the full year, down from 37 percent a year earlier, excluding the UK bank payroll tax on certain pay awards, Dow Jones stated.

Goldman Sachs reports fourth quarter results on Wednesday, while Morgan Stanley will report earnings Thursday.