From Wall Street to the City of London to Hong Kong's Central District, bankers are bracing for bonuses to be down 7 percent on average from a year ago, and higher salaries will only partially cushion the hit, a Reuters/IFR global poll shows.
Some finance industry professionals are expecting drops as steep as 30 percent after weak trading results that are depressing bank profits and shrinking the bonus pool, according to the poll of more than 25 professionals.
Unlike in other industries, bankers typically rely on year-end bonuses for a large portion of their yearly compensation.
Although most banks have not yet informed staff of their actual bonuses for 2010, the dismal expectations reflect the fact that generally bankers, traders, and salespeople have been told to be ready for a low payout.
"Flat is the new up," one U.S. banker said.
A London-based investment banking analyst said, "You would have to live in cuckoo land to expect bonuses to be up on last year. Even if you're a star performer you're going to be down."
This is a sharp turnaround from last year, when Wall Street bonuses jumped 17 percent on average, according to a report by New York State's comptroller.
The findings from the Reuters/IFR poll are in line with executive search industry reports.
The poll pointed to heftier payouts in Asia, where business is booming, and to flat-to-smaller bonus pools for European and United States bankers.
Bonuses may not be strong, but bankers are receiving higher salaries, which reduces the hit to total income. Many banks have boosted salaries this year on the theory that concentrating compensation into sky-high year-end bonuses encourages reckless risk-taking. Some salaries have doubled, according to compensation consultants.
Even so, bonuses still typically account for about 80 percent of top-level employees' compensation, said Joe Sorrentino, compensation consultant at Steven Hall & Partners in New York.
Banks' revenues have been pressured this year by weaker trading volumes. The one bright spot has been merger advisory, where volumes have risen from last year, but where profits are typically low compared with trading.
Bankers' bonuses became a hot-button issue worldwide after governments provided trillions of dollars to bail out banks during the financial crisis in 2008.
Just a year later, banks were back to big bonuses, attracting the ire of taxpayers and politicians who complained that banks' profits were privatized and losses were socialized.
The European Union has responded with tough guidelines on bonuses that limit how much upfront cash bankers can be awarded to as little as 20 percent of their bonus. Top bankers in Britain are due to meet with government officials this week to hash out compensation plans in line with the new EU rules.
In the United States, lawmakers are discussing forcing banks to award half or more of their executive pay in stock or other deferred compensation, according to a Wall Street Journal report Tuesday.
Bankers who worked on some of the year's most lucrative deals are upbeat about their bonus prospects.
Mergers and acquisitions overall rose for the first year since 2007, which should boost the pool of money available to bankers who worked on top M&A deals.
In Asia, the Reuters/IFR poll revealed the greatest optimism, with five bankers surveyed expecting bonuses up 6.5 percent on average. One Asia equity capital markets banker expected a bonus up as much as 25 percent, and a mergers banker expected a 25 to 30 percent improvement.
The large payouts would be in line with a surge in Asian deals. Four of the 10 largest equity offerings this year came from Asia, according to Thomson Reuters data.
Banks generally fared better in Asia than in Europe in 2010, bolstered by growing local markets. The region skirted the worst of the financial crisis and the sovereign debt problems.
In the United States, by contrast, bonuses are expected to be down 13.3 percent, while European bonuses will be down an average of 14.4 percent, according to the Reuters/IFR poll.
One European equity capital markets staffer told Reuters that because of the poor performance of his business and the region generally, he expects his total compensation to be down around 20 to 30 percent, even taking in to consideration his higher base salary.
His comments are in line with estimates from search firms and compensation consultants.
"Total compensation is going to be lower," said Michael Karp, managing partner of Options Group, based in New York. Banks' bonus pools — the total kitty available to divide between regions and departments — will be down from 20 to 30 percent, he forecasts.
Goldman Sachs Group and JPMorgan Chase & Co have put less money aside to pay staff so far this year, compared with the same time last year, according to filings with regulators.
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