Now that we know how much J.P. Morgan, Goldman Sachs, UBS, Credit Suisse and Deutsche have accrued for their investment bankers in the first quarter, we can say two things.
1) American banks pay more (with the exception of Deutsche, whose pay per head figures for the corporate and investment bank aren’t comparable because, unlike elsewhere, it doesn’t count its back office staff in its headcount).
2) Pay is falling.
Here is the pay hierarchy, based on average compensation per head, accrued in U.S. dollars for Q1. This includes payroll taxes and suchlike.
- Goldman Sachs: $135k
- J.P. Morgan investment bank: $113k
- Credit Suisse: $108k
- UBS: $97k
On average, pay fell 13 percent in the first quarter. Goldman and J.P. Morgan cut pay the least (-9 percent year-on-year). Deutsche (which is at least comparable with itself) cut pay the most (19 percent year-on-year).
Notably, however, pay competitiveness is no longer about absolutes. It’s about structure. Mostly, it’s about how long you have to wait for what you’re owed.
Therefore, although UBS appears to pay the least, it was keen to emphasize this morning that it’s not really deferring much of its compensation: only 27 percent of its compensation across the bank will probably be deferred this year. In the recent past, it deferred 35 percent to 40 percent.
Unfortunately, this may not be enough to improve UBS’s allure. In its latest newsletter, search firm Riverhouse Partners points out that Goldman Sachs and J.P. Morgan appear to pay very high proportions of cash – even to their very high earners.
Hence, they say people earning up to $2 million at Goldman received 80 percent of their compensation in cash last year. And people earning up to $1 million apparently received 70 percent of their compensation in cash at J.P. Morgan.
European banks (many of which have cash caps) are therefore losing out doubly: they pay less, and they defer more. It doesn’t take enormous astuteness to see that U.S. banks are more appealing. The only problem is that U.S. banks aren’t keen to buy out stock when hiring from their European rivals. This leaves a conundrum: do you cut your losses and try escaping a European bank now, or do you hang on and get even more tied-in? Hmm.
Editor's note: This article first appeared on our UK site.