National Post (National Edition)
Who'll set the ball rolling as bonus season looms?
`Isn' t this supposed to be the start of a lockdown?” asked one barista working in the heart of London's financial district on Nov. 5, the first day of England's second national lockdown. “People are clearly fed up now and want to go back,” added a security guard, who had spent the early months of the pandemic patrolling empty streets.
Bankers and traders flocking back to London's financial district this autumn were not doing so just because they were fed up with working from home. Instead, many wanted to make sure they were being seen ahead of bonus day. The hope was that being in the office each day as a critical worker would put them in good stead for payday, explains one of the Square Mile executives who decided to commute in.
Meetings about this year's bonus pot are taking place now and the stakes are high. Investment banking revenues have soared this year after market volatility caused by the pandemic triggered a trading boom and clients raced to raise debt and equity to get through the crisis. Anyone working for a big investment bank knows how much money has been made and many feel they deserve a slice.
Sources say discussions are taking place to manage down expectations even though traders are on track for bonus rises of between 10 per cent and 20 per cent. The likes of Goldman Sachs, which has a smaller consumer banking arm than its rivals and so is less exposed to losses from unpaid loans, will come under particular pressure to reward staff.
“It's sharp elbows this year,” says one City banker. “Many people who went into banking after the financial crisis have been promised that the good times will come back. If they don't get big bonuses this year (after record performance), then when?”
If the message on bonus day is that the halcyon days before the financial crisis really are never coming back, the fear is that some may decide to jump ship. This is particularly the case in Europe, where banks have struggled to keep up with their Wall Street peers for years.
Deutsche Bank, once known for its gigantic bonuses and lavish Christmas parties, has come under so much pressure to cut costs since the 2008 crash that it has got rid of its free office fruit bowls and Christmas pensioner party.
However, many executives are keenly aware that the sight of bankers taking home giant bonus cheques after the year just gone would be unpalatable, to say the least.
The pandemic has destroyed jobs and is forecast to blow a US$28-trillion hole in the global economy by 2025, leaving the entire world significantly poorer.
Banks that have been handing out billions of pounds worth of emergency COVID loans will soon become debt collectors. U.K. regulators this month warned bank boards against paying out vast cash bonuses, a sentiment likely to be echoed elsewhere. Most bank chiefs agreed at the start of the pandemic not to pocket a bonus this year.
“We have heard from our clients in the U.S. that they are facing pressure not to be seen to pay excessive bonuses coming out of 2020 given the broader economic backdrop,” says Michaela Rosbrook of Mayfair-based headhunter Wessex Partners.
Under pressure from all sides, no bank boss wants to stand out during the forthcoming bonus season. Christian Sewing, chief executive of Deutsche Bank, admitted in an interview earlier this month that, while performance would be rewarded, “we need to obviously look at our competition” before deciding final numbers at the end of the year.
Barclays is also said to be keeping an eye on its peers before making any decisions.
The picture is slightly different for banks that do not have large and profitable investment banking arms. High-street lenders have been busy setting aside cash for loans that households and businesses might not be able to repay because of financial difficulty and at some point will have to start collecting those debts.
Lloyds, where the average salary is 36,600 pounds (US$49,200) a year, has already scrapped bonuses due to the impact of the pandemic on its profits.
Bonuses at its closest rival, taxpayer-backed NatWest, remain undecided but are expected to fall. Although branch staff have been on the front line of the pandemic, they have no prospect of a bonus bonanza.
After a difficult year lenders are trying to reward staff in other ways this Christmas. Lloyds is giving most employees above-inflation pay rises; Virgin Money has scrapped pay rises but is giving everyone 500 pounds; UBS has given lower-paid staff an extra week's pay and increased basic salaries; and Citigroup is offering its U.S. workers a 12-week sabbatical and extended childcare benefits.
These alternative rewards could be the future of bank pay if public anger is to be allayed. Meanwhile, the bankers and traders who are in line for a 2020 windfall are unlikely to go around shouting about it.
AFTER A DIFFICULT YEAR LENDERS ARE TRYING TO REWARD STAFF IN OTHER WAYS THIS CHRISTMAS.