This coming January will be a very good month to be a salesperson at a Mercedes Benz dealership or a real estate rep out in East Hampton. Bankers who made it through the crisis will see their pockets lined with cash next month as company shares finally vest, and at great prices.
Following a miserable 2009, banks cut pay and headcount while distributing a greater percentage of bonuses in deferred stock, rather than cash, something bankers typically hate. Five years later, come vesting time, the move is creating a financial windfall for bankers who sheltered the storm, according to a new report in Crain’s New York Business.
Take Goldman Sachs, which granted bankers $3.6 billion worth of shares that couldn’t be sold until January 2015. Those shares are now worth $5.1 billion as Goldman’s stock price has increased 40% over that time.
Same song, different tune at Bank of America and Morgan Stanley, where restricted shares have more than doubled in value over the last five years. Between the three banks, well over $10 billion in shares will vest in January. Somewhat ironically, the financial crisis that many blamed on Wall Street enabled bankers to buy low on their own company stock. Now they’re in a position to sell high.
Moving forward, deferred shares likely won’t provide such a happy ending. Stock prices at banks were understandably deflated in 2009 following the financial collapse, giving plenty of room for a correction. As of earlier this year, five of the six largest U.S. banks were trading above their tangible book value, a significant reversal from just a few years ago.
Moreover, regulators have plans to make bonus payments even more painful for bankers in the future. New York Federal Reserve Bank President William Dudley said in October that bankers should be paid bonuses in debt securities rather than in equity,allowing any future fines to be scooped off the top of the bonus pool, and that the vesting period should last a full decade. Ugh.
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RBS Shuttering Restructuring Units (Bloomberg)
RBS is shutting down its European debt restructuring business outside of the UK. It’s closing offices in Amsterdam, Madrid, Milan and Paris, among other cities.
Former Bankers Hacking M&A Teams (NY Times)
Hackers who have likely worked on Wall Street have stolen merger-and-acquisition information from more than 80 companies this year, and used the data to trade ahead of big deals, according to a new report. Much of the hacking simply involved targeting Wall Street execs with spearphishing e-mail campaigns, prompting them to give up passwords that could help unlock market-moving information.
The Perils of the Buy-Side (Bloomberg)
Brevan Howard is closing its commodity hedge fund run following a string of losses. The fund, headed by Stephane Nicolas, joins the 461 that were liquidated during the first half of the year, on pace for the most closures since 2009. The buy side is alluring, but joining is plenty risky.
The Man Behind the Mask (NY Post)
Meet the Batman of Wall Street. Daniel Yu, founder of Gotham City Research, doesn’t just target overvalued companies. He goes after and exposes frauds, often taking down his targets and sending them into bankruptcy. He’s this year’s best short seller.
Bigger But Not Big (Pension & Investments)
CalPERS paid staffers $8.7 million in bonuses in the year ended June 30, up 14% from the previous year but still not all that much considering the industry. The top bonus went to interim Chief Executive Officer Ted Eliopoulos, who received just $305,810.
Buzz Around the Office
First-Class Was a Sty (CNN)
A woman was kicked off a United Airlines flight after her emotional support animal was causing a ruckus. That makes some sense considering the animal was a full-grown, 80-pound pig.
Quote of the Day: “We don’t have specific attribution but we feel strongly this is the work of Americans or Western Europeans who have worked in the investment banking industry here in the United States.” – a security firm on who they think is responsible for a string of M&A hacks