Huge payday for Bank of America CEO
• Meanwhile, Citigroup cuts its chief’s compensation
Bank of America awarded CEO Brian T Moynihan $20m for his work in 2016, raising his compensation 25%, while Citigroup cut CEO Mike Corbat’s 6.1% to $15.5m.
Moynihan received $18.5m in stock grants for 2016, according to a regulatory filing on Friday, up from the $14.5m he received for 2015. He has not received a cash bonus since 2007. Corbat’s pay included a $4.2m cash award and $9.8m in shares that pay out over years based on performance.
Both executives received salaries of $1.5m.
Moynihan, 57, has worked to boost the lender’s profitability through cost reductions and by resolving legal matters left over from the financial crisis. The bank increased profit to $17.9bn in 2016, and Moynihan said in April he would cap expenses at $53bn by the end of 2018 — a $2bn drop from 2016.
Despite dialling back costs, Moynihan did not achieve his long-term 60% efficiency ratio target in 2016. Bank of America, the second-largest US lender, ended the year with a 65% ratio of noninterest expense to net income, an improvement from 69% in 2015. The firm also has not achieved its 12% target for return on tangible common equity, which remained below 10% at the end of 2016.
Bank of America shares climbed 31% in 2016, the most among the largest US deposittaking lenders. The surge was largely due to a fourth-quarter rally in financial stocks fuelled by investor expectations that President Donald Trump’s election would result in less regulation and lower taxes.
Citigroup’s profit fell 14% and return on assets failed to meet the 2016 target, leading CLSA analyst Mike Mayo to criticise management for missed goals and uncertain targets that prevent investors from being able to hold the company accountable. The stock’s 15% gain in 2016 trailed the 26% advance of the 24-company KBW Bank index.
Half of Corbat’s stock award for 2016 will be earned if the bank meets goals for return on tangible common equity and cumulative earnings per share, measured through 2019.
The payout is capped at the target number of shares in case the bank’s stock performance over that period is negative. The other half vests over four years subject to performance conditions that were not specified in the filing.
The CEOs of other major Wall Street banks saw their 2016 compensation increase. JPMorgan Chase boosted CEO Jamie Dimon’s target pay 3.7% to $28m and Morgan Stanley’s James Gorman was awarded $22.5m, a 7.1% increase.
Goldman Sachs Group has not yet disclosed pay details for Lloyd Blankfein but the CEO’s package for 2016 could be about $22m, not counting his longterm incentive, according to a Bloomberg estimate. That would be a decrease from the $23m he got in 2015.
Wells Fargo has not released 2016 executive compensation figures either. The firm’s board would probably decide to withhold bonuses from some top executives, including CEO Tim Sloan and chief financial officer John Shrewsberry to hold managers
UNCERTAIN TARGETS PREVENT INVESTORS FROM BEING ABLE TO HOLD THE COMPANY ACCOUNTABLE
accountable in the wake of a scandal involving the opening of bogus accounts, a person with knowledge of the matter said last week. Denying the bonuses was not meant to reflect findings of specific wrongdoing, the person said.
Citigroup also disclosed equity awards for other senior executives, including president Jamie Forese and consumer chief Stephen Bird, which can be used to calculate total pay for 2016. Forese saw his compensation trimmed 4.4% to $15.3m, while Bird got a 5.9% raise to $9m, according to the filings and Bloomberg calculations using a previously disclosed formula and salary figures.
Bank of America did not disclose complete pay details for Moynihan’s deputies, but chief operating officer Tom Montag got 412,196 shares, half of which are tied to performance, according to a separate filing made on Friday.
They were worth about $9.6m based on a 10-day price average, which is the measure the bank typically uses, according to its proxy. That compares with stock awards valued at $8.7m for 2015.
Chief financial officer Paul Donofrio received shares worth $6.24m under the same method.