Wall Street Prepares For Bonus Season Pain As Comp Set To Slide

Tyler Durden's picture


In a shining example of the law of unintended consequences, when 2012 started Wall Street bankers had expected that all it would take for bonuses to surge and offset 2011's deplorable comp, is another round of QE. Well, QE came and went, not only in the US, but virtually everywhere else, and sure enough the market traded up to new 5 year highs (and just why of all time highs as well), yet something was not going according to plan: profits, and thus bonus accruals. Specifically, revenue from trading cash products such as stocks and bonds, plunged as volatility collapsed whether due to the implicit Bernanke put, or to the explicit selling of VIX puts by the Fed to give the impression that all is well. The result was the elimination of volatility which has put numerous day-traders out of business, and crushed trading volumes, just as we warned would happen in late 2011. Another side-effect of the Fed buying the long end is everyone piling in and frontrunning Bernanke in the 10-30 Year segment, flattening the curve, and making Net Interest Margin profitability a thing of the past. The result has been a year in which despite stocks rising, banker pay is set to tumble even more (for those lucky enough to still even have a job that is, which for UBS and Nomura means about 80% of the employees a year ago) with traders of cash equities and derivatives set to see another 20% drop in comp from 2011 according to Options Group. The end result: 2012 all in comp will be half of what it was in 2007. Say goodbye to the Master of the Universe - they will now have to settle for a galaxy or two at most.

From Bloomberg:

Almost 20 percent of employees won’t get year-end bonuses, according to Options Group, an executive-search company that advises banks on pay. Those collecting awards may see payouts unchanged from last year or boosted by as much as 10 percent, compensation consultant Johnson Associates Inc. estimates. Decisions are being made as banks cut costs and firms including UBS AG and Nomura Holdings Inc.fire investment-bank staff.


Some employees were surprised as companies chopped average 2011 bonuses by as much as 30 percent and capped how much could be paid in cash. That experience, along with public statements from top executives, low trading volumes in the first half and a dearth of hiring has employees bracing for another lackluster year, consultants and recruiters said.


“A lot of senior managers won’t have to pay up because they’re saying, ‘Where are these guys going to go?’” said Michael Karp, chief executive officer of New York-based Options Group. “We’re in an environment where a lot of people are just happy to have a job. Expectations have been managed so low that people will be happy with what they get.”


More modest expectations reflect a new reality as total pay is about half what it was in 2007, Options Group said in a report last month.

Somehow we doubt that even an 8% comp drop will evoke much sympathy for a class of workers that should be receiving government utility salaries following the 2008 wholesale bailout of the entire industry:

Total pay for investment bankers and traders industrywide probably will fall 8 percent, according to the Options Group report. Traders in fixed-income businesses can expect to see a 6 percent increase in compensation, while pay may decline 17 percent in equities and 13 percent in investment banking, the report shows.


Credit traders in loan products with the title of vice president, the third-highest at most banks, probably will receive compensation averaging $800,000 this year, up from $720,000 for 2011, according to the report. Cash-equity traders with the same title may get $290,000, down from $370,000.


Traders of cash equities and equity derivatives will have the biggest drop in compensation, both down at least 20 percent from 2011, according to the Options Group report. Traders in securitized products and emerging markets will see at least a 10 percent jump in pay, the largest gains, the report shows.

Of the declining comp, actual cash will, again, be only a modest portion (assuming none of it is clawed back that is):

Employees were stunned by the 2011 bonuses in part because some banks changed their pay structure, said Joseph Sorrentino, a managing director at New York compensation-consulting firm Steven Hall & Partners. Morgan Stanley (MS) capped cash bonuses at $125,000, while Barclays Plc (BARC) limited them to 65,000 pounds ($103,000). Credit Suisse paid employees a portion of last year’s bonuses in bonds made from derivatives to help the Zurich-based company cut risk and improve its capital position.


About 17 percent of global banks clawed back compensation from previous years in 2011 as European and North American regulators pressured them to impose penalties on employee risk- taking, according to a survey of 63 companies conducted by consulting firm Mercer LLC and released in August.


Banks also have been discussing pay more in public, Dicks said. Deutsche Bank, Germany’s biggest lender, said in September it will increase the vesting period for deferred bonuses for top management to five years from three.

Demonstrating the persistency bias still prevalent on Wall Street, a half of the workers once again expect improving conditions. They are all about to be very disappointed in a world in which discretionary SG&A just is no longer there any more:

Still, almost half of Wall Street employees expect a bonus increase this year, according to a survey of 911 employed financial professionals conducted between Sept. 26 and Oct. 3 by job-search website eFinancialCareers.com. A smaller number, 27 percent, said bonuses will rise in the next three years, while 31 percent saw no change and 42 percent anticipated declines.


There have been signs of optimism in recent weeks, as the nine largest global investment banks reported a 38 percent jump in third-quarter trading revenue from a year earlier, according to data compiled by Bloomberg. Companies also may start adding positions they had been waiting to fill until after the U.S. elections, providing some competitive pressure on pay, Alliance’s Sorbera said.

Finally, and as always, one firm stands out when it comes to comp, even in the gloomiest of conditions. See if you can spot it on the chart showing comp below:

  • UBS: -23% Y/Y
  • Deutsche: -12% Y/Y
  • Credit Suisse: -11% Y/Y
  • JPMorgan: -9.4% Y/Y
  • Morgan Stanley: -8.5% Y/Y
  • Goldman Sachs: +9.5% Y/Y
Your rating: None

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Tue, 11/13/2012 - 10:08 | 2975775 Inthemix96
Inthemix96's picture

When this shit show ends.

It will be fucking epic.

Oh, fuck you bernank, and fuck the waste of human skin at JPM.

Tue, 11/13/2012 - 10:17 | 2975801 GetZeeGold
GetZeeGold's picture



Got a Pepsi and some popcorn......bring it.


Hold off for a second.....I've got to check off sex under the desk off my bucket list.

Tue, 11/13/2012 - 10:17 | 2975804 francis_sawyer
francis_sawyer's picture

The hookers & coke dealers are not happy to hear about this...

Tue, 11/13/2012 - 10:21 | 2975814 GetZeeGold
GetZeeGold's picture



I hear the CIA is looking to hire.

Tue, 11/13/2012 - 10:24 | 2975822 SilverTree
Tue, 11/13/2012 - 10:27 | 2975827 JPM Hater001
JPM Hater001's picture

Hey, someone tell me what these 3 spikes are to the preopen highs...the swing is immense.  Upwards of 70 point swings.  Not once but three times.


Tue, 11/13/2012 - 10:40 | 2975880 SheepDog-One
SheepDog-One's picture

Looks like blatant pump and dumps to me.

Tue, 11/13/2012 - 12:34 | 2976360 redpill
redpill's picture

Not everyone can be as ballin' as Alex Hope, mmmkay?

Tue, 11/13/2012 - 10:50 | 2975933 pods
pods's picture

Looks like a shitty HPLC baseline to me. 

EKG of an epileptic?


Tue, 11/13/2012 - 11:13 | 2976010 Joe Davola
Joe Davola's picture

No surprise, whenever I start to see copper thefts from homes/businesses make the local newscasts, it is a sure sign the price is about to drop.

Tue, 11/13/2012 - 11:09 | 2975992 otto skorzeny
otto skorzeny's picture

immoral scumbags needed!

Tue, 11/13/2012 - 11:02 | 2975979 ziggy59
ziggy59's picture

Which part? The pepsi over the coke?

Tue, 11/13/2012 - 10:11 | 2975787 LawsofPhysics
LawsofPhysics's picture

Having your bonus go from 50 million to 25 million is not painful.  Separating your head from your torso will be however.

Tue, 11/13/2012 - 10:14 | 2975795 Gully Foyle
Gully Foyle's picture


How do you know that seperating your head from your torso is painful?

Sure if it is slowly sawed through then there would be pain.

But a swift cut, most likely not.

Tell you what, you try both ways and get back to us when you have an answer. Personal experience only none of this assumed second hand shit you think is so cool.

( Biden 2016, I'll keep the lights on)

Tue, 11/13/2012 - 10:23 | 2975819 LawsofPhysics
LawsofPhysics's picture

"It is better to remain silent at the risk of being thought a fool, than to talk and remove all doubt of it."

Tue, 11/13/2012 - 10:53 | 2975948 pods
pods's picture

Is it just me or is Gully fascinated about gruesome death and deviant sexual stuff?

Anyone want to take the under on whether old Gully has a gimp in the basement?


Tue, 11/13/2012 - 11:45 | 2976130 Overfed
Overfed's picture

Or maybe a walrus?

Tue, 11/13/2012 - 11:43 | 2976121 Overfed
Overfed's picture

Are you on drugs, or just a retard?

Tue, 11/13/2012 - 10:11 | 2975788 Gully Foyle
Gully Foyle's picture

Biden 2016, are you there God?

Tue, 11/13/2012 - 10:13 | 2975791 Ljoot
Ljoot's picture

Biden/Wasserman-Schultz 2016!


Tue, 11/13/2012 - 10:23 | 2975821 GetZeeGold
GetZeeGold's picture



I admire your optimisim.....shine on you crazy diamond!

Tue, 11/13/2012 - 10:15 | 2975797 Dr. Engali
Dr. Engali's picture

It's a good thing old squiddy has it's tentacles everywhere....times are getting rough and they are going to need that that reach. I have a feeling though they are going to lose some of that grip soon.

Tue, 11/13/2012 - 10:15 | 2975798 Yes_Questions
Yes_Questions's picture


Is that why no hooker or bag of blow in the photo?

Just a measely twelve year old?

Tue, 11/13/2012 - 10:19 | 2975808 new game
new game's picture

zirp is our best ally against the enemy/themfucking themselves because they are really that stupid...

long live zirp til r o cap is less than cost - fucking spiral to more manipulation-calling ben, now what?

Tue, 11/13/2012 - 10:19 | 2975809 SheepDog-One
SheepDog-One's picture

aw thats a shame

Tue, 11/13/2012 - 10:22 | 2975813 Mercury
Mercury's picture

Suddenly bankers are seeing more good reasons to expand opportunities in "public service".

Tue, 11/13/2012 - 10:25 | 2975825 Urban Redneck
Urban Redneck's picture

So the banks are sharing less of their free Bernanke bucks with the staff, which means Turbo Tax Timmy will get a lump of coal for Christmas, and have to borrow even more money, which will force Uncle Ben to print even faster.

Only in bizarro world are nominal labor wage cuts inflationary 

Fair Share vs Concentration Risk

Tue, 11/13/2012 - 10:27 | 2975828 Inthemix96
Inthemix96's picture

And on another note.

Lets find out how much a mans lbour and outright skill is worth when the funny money games comes to a stop.

Lets see if the infamous bernank can hold a candle to a joiner, an electrician, a plasterer, a brickie, or multitudes of other usefull tradesmen and women.  Lets see how far the poisened fucking dwarf lasts pushing piles of non-existant piles of fucking make believe paper about.

In my opinion you horrible height challeneged cunt, you are fucked.  I hope this filthy excuse of a waste of humanity starves to death.  Be a fitting end to a trully worthless cunt.

Fuck you bernank

Tue, 11/13/2012 - 10:34 | 2975851 tocointhephrase
tocointhephrase's picture


Tue, 11/13/2012 - 10:33 | 2975840 toady
toady's picture

They'll still get more in this years bonus then 95% of the population will see in their entire lifetime.

Tue, 11/13/2012 - 10:36 | 2975855 tocointhephrase
tocointhephrase's picture

Looks like Blythe just got in the office

Tue, 11/13/2012 - 10:42 | 2975890 Floodmaster
Floodmaster's picture

A world without the Stocks markets would be a better world. Their productive value to society is minimal or non-existent.

Tue, 11/13/2012 - 10:49 | 2975930 Incubus
Incubus's picture

A world without stocks or fractional reserve banking is a better place.


Tue, 11/13/2012 - 10:55 | 2975960 pods
pods's picture

You know it is rough when the squid is in single digit bonus territory.

Maybe we outta take up a collection for them?  Doing God's work and all.


Tue, 11/13/2012 - 11:01 | 2975975 buzzsaw99
buzzsaw99's picture

Loan loss reserves will be paid to dimon et al as bonuses.

Tue, 11/13/2012 - 11:17 | 2976027 Joe Davola
Joe Davola's picture

It will be hard to close the deficit when those making 250k+ aren't making as much.  Look out below, that 250k number's gonna fall.

Tue, 11/13/2012 - 13:29 | 2976581 Downtoolong
Downtoolong's picture

You mean we actually have to earn the money now?

Fuck! How does that work? Somebody, anybody, tell me, and make it fast!


Tue, 11/13/2012 - 13:57 | 2976684 Crispy
Crispy's picture

Is that Tony Hawk over the right shoulder?

Tue, 11/13/2012 - 14:08 | 2976727 TraderTimm
TraderTimm's picture

I am Jack's complete lack of sympathy.

Reap what you sow, fucking suited psychopaths.

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