And this is why JPMorgan's bankers and traders are facing lower pay

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If there's one thing to be learned from JPMorgan's newly released first quarter results, it's that JPMorgan's own team of banking analysts is pretty good at disclosing what's happening there. Earlier this week the JPM analysts predicted that most banks would reveal a poor first quarter in all of equities sales and trading, fixed income sales and trading and equity capital markets (ECM), but that M&A and debt capital markets (DCM) would do better. JPMorgan's own results follow these predictions exactly.

The performance of JPMorgan's investment bank by business in the first quarter of 2019 vs. the first quarter of 2018 is shown in the chart below. If you were in M&A or DCM you were fine. If you were anywhere else, you were not.

This poor performance is already feeding through into pay. In the presentation accompanying its results, JPMorgan said "performance-based compensation" was cut in Q1. Bonuses won't be paid until 2020, but the implication is that bonus accruals are already down.

Lower revenues in three out of five businesses at the corporate and investment bank (CIB) aren't JPMorgan bankers' and traders' only worry, though. There's also the collapse in the CIB's return on equity (down to 16% in the first quarter, from 22% a year earlier). And then there's all the new hiring. In the past year, JPM added 3,406 people to its corporate and investment bank - an increase of nearly 7%. Combined with lower spending on compensation, this meant that average pay per head at the CIB was lower by nearly 9% in Q119 compared to the previous year.

JPMorgan doesn't say who all those new hires were, but it's fairly certain that a large proportion are working in the bank's swelling technology function. If JPM's front office staff in sales and trading and investment banking want to boost their pay, they therefore somehow need to increase revenues enough to compensate for all the new technologists in their midst. That won't be easy, particularly when the year has begun as dismally as this.

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