Average pay at America’s top six banks is rising at a significantly lower rate than the increase enjoyed by some of their chief executives, as the spoils of Wall Street’s record profitability are shared unevenly between the industry’s elite and their underlings.
Analysis by the Financial Times shows that pay per employee at JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, Citigroup and Morgan Stanley rose by just over 3 per cent last year.
Morgan Stanley has already published data showing that James Gorman, chief executive, was awarded a 7 per cent pay rise— to a total package of $29m — in a year when pay for his 60,300 workers fell by an average of almost 2 per cent to just over $292,000.
More than 85 per cent of the 2,700 staff added by Morgan Stanley in 2018 were hired in the second half of the year, and therefore would have been paid less than half their normal salary.
The bank said Mr Gorman was assessed and paid based on his and Morgan Stanley’s performance, including “record revenues and earnings and a return on equity of 11.8 per cent”.
At JPMorgan Chase, chief executive Jamie Dimon was granted a 5 per cent increase last year — bringing his total package to around $31m. His 256,000 staff enjoyed the highest average pay rise on Wall Street, at 4.4 per cent.
In regulatory documents announcing these pay packages, both banks cited 2018’s strong financial performance, as well as the chief executives’ individual performance.
Total net income for the top six banks, adjusting for tax reform, rose 18 per cent to $119bn in 2018.
But the standout profits did not lead to big pay increases for most of the million people who work across the six institutions.
Average pay at Goldman Sachs fell almost 3 per cent, while workers at Bank of America and Citigroup both got average raises of around 2.2 per cent and Wells Fargo’s staff got just over 4.1 per cent more a head.
Final pay numbers are set at the end of the year, when banks decide how much extra to put into the bonus pot from the fourth quarter. Those decisions came against a backdrop of a sharp fall in fourth quarter trading revenues, increased fears of recession and trade wars. They also coincided with the beginning of the US government shutdown that Mr Dimon warned could reduce the first quarter’s growth rate to zero.
Citigroup was the most forthright about its decision to batten down the hatches in the fourth quarter by trimming $300m from its pay bill in the final three months of the year, with finance boss John Gerspach saying that while some of the cuts were planned, others were a reaction to “market conditions”.
Goldman’s bonus allocations — which were announced to employees on Thursday — were expected to be hit hard by the 1MDB scandal which has left the bank facing lawsuits for billions over its role in helping the Malaysian state fund raise $6.5bn.
Mike Mayo, banks analyst at Wells Fargo, said it made sense that even though profits rose in 2018 increased competition from low cost entrants meant that “banks have no choice but to get more efficient and compensation is part of that”.
He added that some banks were cutting staff costs by “re-pyramiding, involving less senior managers and flattening structures”.
The figures include the whole of the banking groups, but most of the volatility is in their corporate and investment banks where bonuses make up a far larger portion of total pay.
A senior investment banking executive said his division had been largely insulated from cost cuts because it had done well and there was competition for talent in the market.
In advisory, where JPMorgan, Goldman, Morgan Stanley and Citigroup all posted big gains, he said his bank “paid where client relationships had an impact . . . we paid our star performers even if they didn’t have a great year”.
In debt capital markets, where revenues fell for most banks, people had been “extremely well paid” in previous years and were paid less this year. In the securities business, fixed income traders did worst.
