JPMorgan’s senior British traders are said to be miffed. Here’s why

If several senior JPMorgan fixed income traders leave for hedge funds in the next few months, there may be more to it than declining revenues in the fixed income market. The U.S. bank has warned that its fixed income sales and trading revenues are likely to be down by a further 20% in the second quarter, compounding a decline of 21% year-on-year in Q1. But there's allegedly more to the disgruntlement on JPM's trading floor than falling revenues and strict risk limits.

Fixed income headhunters say JPMorgan's senior traders in the UK are feeling doubly fed up now that the bank's famous employee benefit trust (EBT) has been closed. The trust, which ran for 20 years, was open to senior JPMorgan bankers working in London (as long as they weren't U.S. citizens) and was a means for the bank's most senior staff to move money offshore and thereby reduce the amount of income tax they paid on their bonuses.  Estimates suggest that anything from £2bn to £9bn of bonuses were paid into the trust, until the bank was ordered to start winding it down (and to pay all the tax they owed).

In November 2013, it was reported that senior JPMorgan staff had been given until December 7th to pay at least 40% of the tax they'd avoided through EBT.  The sums in question were said to be so large that the bank's staff were reportedly being offered financing arrangements of £300k, alongside mortgages of up to £1m to help pay their debts off.

As a result, headhunters say JPMorgan's most senior British traders came into 2014 feeling peeved. Their bad mood has since been aggravated by the poor bonus prospects in fixed income this year, by far stricter risk limits at the bank, and heavy cost controls in the face of increased compliance spending. Combined with the fact that bonuses at JPMorgan are no longer 'tax efficient' and that any remaining cash in the benefits trust has now been distributed, this is purportedly inclining some of JPM's more senior staff to leave. Hedge funds look like the most appealing option.

"People there are just fed up," said one fixed income headhunter, speaking on condition of anonymity. "The EBT has made its last payment and there doesn't seem much point in sticking around any more."

JPMorgan declined to comment. So far, many of the bank's London staff seem to have stayed put. As we reported on Friday, Cyril Levy-Marchal, is off to Capula. But Levy-Marchal was based in tax-efficient Asia and left the bank in May 2013. If other JPMorgan traders are indeed as disgruntled as they're said to be, they have yet to vote with their feet.

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