Bankers in SA still rake in top packages

As EU acts, big bonuses may be a thing of the past, writes Phakamisa Ndzamela

GIVEN the gargantuan payouts bankers receive, it defies belief that people aspire to winning the lottery rather than just choosing a career in banking. Theoretically, Nedbank and Absa paid total packages of almost R210m to 13 executives in the 2012 financial year.

This is much higher than the National Lottery’s PowerBall record jackpot of just R100m paid to a winner in the Free State in 2011. Nedbank’s seven executive directors shared total direct remuneration — including long-term awards — of about R134m while Absa’s six executive directors shared more than R73m.

This is theoretically, because some of the long-term awards included in the total packages may lapse if certain targets are not met. But nonetheless, it is what the remuneration committees expect to pay if everything is on track.

Both Nedbank and Absa pay their investment banking chiefs very well — in some cases their pay rivals that of the CEO.

In Nedbank’s case Brian Kennedy, the CE of Nedbank Capital was allocated a total package of R20.3m compared with the R28.7m package allocated to CEO Mike Brown. Mr Kennedy’s total package, including long-term incentives, topped that of the chief operations officer and chief financial officer.

At Absa Group, Stephen van Coller, Absa Capital CE, was allocated a total package — including long-term incentive plan awards, of R21.8m compared to R16.6m allocated to the group CE Maria Ramos.

What these numbers show is that investment bankers are more highly compensated than retail bankers — although retail and business banking was the biggest contributor to Nedbank and Absa’s group headline earnings.

Nedbank’s retail and business banking division generated about R3.4bn — while group headline earnings were R7.5bn in 2012.

Nedbank Capital reported headline earnings of R1.4bn. Nedbank retail and business banking chief Ingrid Johnson was allocated a total direct package of R19.4m compared with Mr Kennedy’s R20.3m.

It must be noted that Nedbank Capital grew its profits by a greater margin.

At Absa the retail and business banking operations posted headline earnings of R4.3bn, compared with the R2.6bn posted by corporate and investment banking and wealth.

Mr van Coller was allocated total pay of R21.8m against the R8.8m package allocated to the then retail and business banking chief Bobby Malabie.

Similarly at Absa,

the corporate investment banking and wealth division grew earnings more quickly than the retail and business banking units, which posted a decline.

Another common feature of Nedbank and Absa is that annual bonuses exceed basic pay by substantial margins — in some cases annual bonuses are four times basic fixed pay.

With proposals in the European Union (EU) aimed at capping bonuses, this phenomenon is unlikely to last.

The EU has reached a preliminary agreement to try and limit the bonuses that bank executives get. The plan is to prohibit bonuses from exceeding fixed basic pay.

Flexible pay, such as annual bonuses, will be allowed to increase to twice fixed salary — if shareholders approve.

Two South African banks likely to be affected are Absa — which is Barclays-owned — and Investec — listed in both London and Johannesburg.