Bonus announcement week is nearly upon us, which means we are right in the heart of bonus expectation week. As always, the picture is muddled, with some clear winners and losers. But generally speaking there should be plenty of disappointment on Wall Street as banks performed well but were caught up in costly scandals and litigation.
The New York Post is reporting that the industry’s compensation pool will remain relatively flat compared to last year at around $16.7 billion, or an average of $164,530 per person, due mainly to the billions in fines banks paid out in 2014. The biggest losers will clearly be traders, particularly those who work in fixed income. Sadly, the fourth quarter didn’t save what was a slow first nine months where banks saw extremely low volatility in the markets.
In fact, Citigroup decided to slash bonuses for fixed income and equity traders by 5% to 10% after initially planning to keep the bonus pool flat from a year ago, according to the Wall Street Journal. The final weeks of 2014 were particularly painful, it appears.
Meanwhile, bonuses should be better for investment bankers and wealth managers, although they may not reach the same levels that some may expect. Bankers working in M&A and equity underwriting had a big year but, as one executive told the Financial Times, investment bankers didn’t see their bonuses cut at the same rate as traders during the crisis, so they won’t see a huge rebound.
As you may remember, Barclays infamously increased bonuses for investment bankers last year despite the bank losing money, assuming they’d see an exodus of talent if they made any cuts (people left anyway). So, depending on the group, investment bankers and wealth managers could see bonuses rise by as much as 10%, a smaller increase than many likely think they deserve.
In terms of specific firms, Morgan Stanley bankers should go home the big winners. Morgan Stanley’s safe, money-management-focused strategy paid off extremely well last year, and Chief Executive James Gorman has already indicated that the firm would reward employees for the tough sledding they have done over the past few years as the bank turned itself around.
M&A bankers at Goldman Sachs should also do well after the firm worked on more than $1 trillion worth of deals in 2014, a number that hadn’t been hit by any firm since before the crisis. However, Goldman’s overall comp-to-revenue ratio is expected to remain around 38%, according to the Financial Times, one of the lower ratios in the firm’s history as a public company.
However, on the whole, U.S. bankers will still fare better than their European counterparts.
Hiring Roundup (eFinancialCareers)
In the latest hiring roundup, Deutsche Bank is adding back officer staffers in the U.S., investment banks are desperate for healthcare specialists and several new hedge funds have recently launched.
How Old Is Too Old for the CFA? (eFinancialCareers)
Is it worth starting the CFA Program if you’re no longer in the first flush of youth? Maybe not.
Nasdaq Eyeing the Dark Side (WSJ)
Nasdaq wants to become a dark pool operator, offloading the responsibility from large banks. It’s unclear what job ramifications the move would have, but you’d have to figure Nasdaq would need to beef up their tech, compliance, risk and operations groups. Meanwhile, Goldman Sachs suffered an outage at its European dark trading pool on Monday.
Whitney Whiffs (Bloomberg)
Here’s an interesting chronicle of the downfall of once-prominent banking analyst Meredith Whitney’s hedge fund, which was launched just over a year ago but has lost money for eight straight months and is being sued by her largest investor. Not employing any analysts was a bold move that didn’t pay off.
Bros For Life (WSJ)
“Many props bro – it’s all good in the hood biatchhhhh,” one Wells Fargo analyst wrote to one of the firm’s traders in 2010. “Bro Fk it – Were partners,” he responded. “Together, we can lift this sector team and crush it.” The terribly clichéd emails are part of a civil insider trading suit filed against the two men.
Lifetime Bans For Everyone! (Bloomberg)
A Credit Suisse trader has been banned from Hong Kong’s financial industry for life for making fictitious trades and covering up losses. Elsewhere, former Goldman Sachs director Rajat Gupta saw his lifetime ban on serving as an officer or director of a public company upheld by the U.S. Supreme Court. Gupta was busted for insider trading and is currently in federal prison.
Hedge Fund Paparazzi (Bloomberg)
If you are having trouble finding work, maybe go out and try to photograph some hedge fund managers. Many don’t want their face to be memorable for privacy purposes and pay big money to take pictures of them out of circulation. One unnamed hedge fund manager paid a photographer $20,000 once. Others are so good at evading cameras that websites are forced to use decades-old photos when covering their firms.
Buzz Around the Office
Ever wonder what you’d look like with 94 iPhones duct tapped to your body? Now you don’t have to, courtesy of the gentleman who tried to smuggle such a hoard over the Chinese border.
Quote of the Day: “The fines have come to roost. The bonus pool and compensation are the most vulnerable for banks to make up the shortfall.” –Michael Karp, CEO and co-founder of headhunting firm Options Group