World bankers brace for seven percent drop in bonuses: Poll
NEW YORK: From Wall Street to the City of London to Hong Kong's Central District, bankers are bracing for bonuses to be down 7 percent on average from a year ago, and higher salaries will only partially cushion the hit, a Reuters/IFR global poll shows.
Some finance industry professionals are expecting drops as steep as 30 percent after weak trading results that are depressing bank prof- its and shrinking the bonus pool, according to the poll of more than 25 professionals.
Unlike in other industries, bankers typically rely on year-end bonuses for a large portion of their yearly compensation.
Although most banks have not yet informed staff of their actual bonuses for 2010, the dismal expectations reflect the fact that generally bankers, traders, and salespeople have been told to be ready for a low payout. "Flat is the new up," one U.S. banker said.
A London-based investment banking analyst said, "You would have to live in cuckoo land to expect bonuses to be up on last year. Even if you're a star performer you're going to be down."
This is a sharp turnaround from last year, when Wall Street bonuses jumped 17 percent on average, according to a report by New York State's comptroller.
The findings from the Reuters/IFR poll are in line with executive search industry reports.
The poll pointed to heftier payouts in Asia, where business is booming, and to flat-to-smaller bonus pools for European and United States bankers.
Bonuses may not be strong, but bankers are receiving higher salaries, which reduces the hit to total income. Many banks have boosted salaries this year on the theory that concentrating compensation into sky-high year-end bonuses encourages reckless risk-taking. Some salaries have doubled, according to compensation consultants.
Even so, bonuses still typically account for about 80 percent of toplevel employees' compensation, said Joe Sorrentino, compensation con- sultant at Steven Hall & Partners in New York.
Banks' revenues have been pressured this year by weaker trading volumes. The one bright spot has been merger advisory, where volumes have risen from last year, but where profits are typically low compared with trading.
Bankers' bonuses became a hotbutton issue worldwide after governments provided trillions of dollars to bail out banks during the financial crisis in 2008. Just a year later, banks were back to big bonuses, attracting the ire of taxpayers and politicians who complained that banks' profits were privatized and losses were socialized. The European Union has responded with tough guidelines on bonuses that limit how much upfront cash bankers can be awarded to as little as 20 percent of their bonus. -PB News
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