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Morning Coffee: The best and worst paying banks for VPs and Directors. And who carries the can if a stress test is failed?

The number one topic of interest whenever two employees of different banks meet is always “who’s paying best this year”?  And this year, the survey carried out by HR consultancy Emolument for Financial News shows a pretty consistent pattern; U.S. banks, in London at least, are paying substantially better at the VP level than Europeans.

There are plenty of caveats to the data.  It’s based on 140 responses, which is enough to form a valid statistical sample, but means that it could be based on as few as a dozen data points per bank.  And the response rate to these surveys might itself be biased in an unknown direction – on one hand, people who get low bonuses might be too ashamed to talk about them, while the real high fliers might feel they have better things to get on with than replying to surveys.  Not so long ago a similar survey raised eyebrows when it found that Nomura was the best paying bank in London.

But when you have a gap as big as the one between Citigroup (£292k) and SocGen (£150k), and when there’s such a clear geographical pattern to the differences, it does feel like it’s not likely to be a data glitch.  The U.S. banks are making more money, so their employees are making more money.  It’s as simple as that.

There are a few more truisms that are reinforced by this data.  Most obviously, the banks which pay the biggest base salaries, also pay the biggest bonuses.  This is true both in absolute and relative terms; toward the top of the scale, VP’s at JP Morgan earned £143k basis and £141k bonus; at the lower end (BNP Paribas and Barclays), bonuses were more like 50% of base, and this fell to 20-30% at Deutsche and SocGen.  Some banks often claim that they pay low base salaries in order to keep fixed costs down, but are competitive on total compensation; it’s rarely true.

It’s also noticeable that different banks have different cultures when it comes to sharing the wealth.  Deutsche, for example, is right down at the bottom of the league table when it comes to VP pay, with £120k basis and £40k bonus.  One rung up the ladder, however, and the German national champion is almost competitive with JP Morgan at director level, where DB paid total compensation of £350k.  That one notch of promotion is a lot more important at Deutsche than at HSBC, which is at the top of the European pack for Vice-Presidents (£130k basic plus £85k bonus for a total of £215k), but much lower down for Directors, who only take in £55k more at HSBC than VPs do.

The biggest caveat to place on this sort of survey, though, is that the individual variation is always more important than the averages.  Poor performers will get poor bonuses even at the best paying firms, and it’s still possible to get rich at a failing bank if you manage things right.  Being in the right place at the right time helps, but getting the right pay for the right job is what really matters.

Some people who might be nervous about this year’s compensation round might be in the compliance departments of Goldman Sachs and Morgan Stanley.  In a week’s time, we will find out if the capital plans of the big banks have been approved, and if they’re going to be able to pay out the dividends and buybacks that they planned to their shareholders.  And although the overall picture from the first round of stress test results seemed favourable, the two big-paying Wall Street investment banks were much closer to the pass-fail mark than they might have expected.

If a capital plan is rejected, it’s a significant embarrassment for the top management and potentially a serious disappointment for the share price.  But who would carry the can for it?  There are several candidates – the CEO who sent a too ambitious plan to the regulators in the first place, the traders and bankers who acquired the assets that made the bank look risky, and the risk managers who got out of touch with how the regulators might see them.  But the probable most likely candidate for the blame in any bank is the bearer of bad news, and that means the person with the regulatory relationship who has the job of carrying the Fed’s decision to the board.  Good luck, guys …

Meanwhile …

Half of all women working in hedge funds have experienced #MeToo behaviour, 30% at their current employer. (Financial Times) 

Banks are using “Lehman style” window-dressing to make their capital ratios look good. (Bloomberg) 

Wells Fargo reduces equity research headcount … (Bloomberg)

…And Nomura cuts 28 global markets staff. (Bloomberg) 

Could Brexit really be the end of London’s dominance in European finance?... (Bloomberg)

… although a new “settled status” for EU citizens might help banks retain staff. (Financial Times) 

Stuart Roden, chairman of Lansdowne Partners, is leaving the hedge fund he co-founded. (Financial Times) 

Barclays appoints Steve Penketh as CFO and COO of Barclays International, the investment banking part. (The Street)

China Renaissance Group is to IPO, with a valuation as high as US$800m. (Reuters) 

After David Drumm’s sentencing in Ireland, here's a short list of all the other bankers who went to jail. (New York Times) 

What is it about tech firms that attracts “incels”? (Wired)

Do rich people really have less empathy? (Financial Times) 

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Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libelous (in which case it won’t.)

AUTHORDaniel Davies Insider Comment
  • An
    26 June 2018

    Half of all women working in hedge funds say they have witnessed inappropriate behaviour (not 'experienced #MeToo behaviour'), 30% at their current employer. 'Inappropriate behaviour' is not defined, and often the term is used prejoratively to make behaviour which isn't specified sound worse than it is. No evidence of the inappropriate behaviour is provided.
    Unfortunately the FT hasn't enabled comments to allow discussion of the issue.

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