The worrying thing about this year's bonuses at U.S. investment banks

Most U.S. investment banks have now announced their bonuses for 2017. As we have various reported, they are mostly down in sales and trading and mostly up in investment banking divisions. In light of last year's falling sales and trading revenues and P&Ls, shrinking bonuses for markets professionals haven't come as a huge surprise, but there's consternation on trading floors all the same.

Headhunters say salespeople and traders are taking issue with the scale of the cuts, which are often out of proportion with the extent of the decline in their P&L.

"People understand when they've performed badly and their pay is cut in line with performance," says the head of one London fixed income search boutique. "It's when they've performed well and their pay is cut, or when their pay is cut a lot more aggressively than the fall in their P&L, that they take issue with it."

By all accounts, disproportionate pay cuts have become a lot more common this year than in the past, particularly in fixed income divisions, where there are suspicions that U.S. banks are cutting bonuses to compensate for losses related to the Trump tax reforms that have cost banks billions in write-downs.  One headhunter said he's spoken to "twenty people" in Bank of America's fixed income business who are unhappy with their allocations: "Last year, BAML paid well. This year, people are down 10% to 20%."

Fixed income revenues at Bank of America were down 6% last year compared to 2016. Banks don't comment on the size of divisional bonus pools, but with bonuses seemingly declining more than revenues and P&L, headhunters say the worry is that they will never return to their previous levels. "If you make 20% less for the bank and you get paid 20% less, that's fine - you can see how to get your bonus back up again," says one headhunter. "But if your bonus declines irrespective of your P&L, it looks like you're down for good. This is the big concern this year."

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