Goldman bankers watch as $120m wiped off the bonus pool
It's been a bad week if you're a banker with a significant amount of stock in your employer. As the Trump effect wears thin and bank stocks fall, so too does the value of 2016's deferred stock bonuses.
Goldman Sachs stock has fallen 6% over the past week. Bank of America stock fell nearly 6% yesterday alone. J.P. Morgan fell nearly 3%. UBS stock is down nearly 4.5% in the past seven days and Barclays is down 2%.
At Goldman Sachs around $2bn of stock bonuses were issued this year in payment for 2017. The first tranche vests in early 2018, leaving Goldman bankers powerless to cash-out as the combined value of their newly issued stock fell by $120m.
At UBS, CHF700m ($700k) of the 2016 bonus pool was deferred, resulting in a CHF31.5m reduction in their value over the past week. At Barclays 2016 deferrals totalled £593k ($797k), resulting in a loss of £34m. Unvested stock bonuses from previous years have also been affected.
The pain is made all the worse because share bonuses for 2016 were denominated in stock issued when the market was peaking in January and February. Goldman Sachs, for example, issued 8.4m of restricted units to its staff this year compared to 15m one year earlier when its share prices was 36% lower. This didn't matter while Goldman stock was high, but it will be painful if bank stocks keep falling.
Deutsche's most prized bankers will be watching this week's decline particularly feverishly. The German bank issued €1.1bn of retention bonuses to its most prized staff after cutting its bonus pool by 80%. However, these bonuses are worth nothing unless the bank's stock is trading at €23 in the first three weeks of 2021. Right now, Deutsche stock is trading at €15.8, down from around €19 when the retention scheme was conceived.