Bear Stearns and Lehman Brothers executives that survived the collapses of their firms and found new jobs should get bigger bonuses than their peers at Goldman Sachs Group Inc, a compensation consultant said.
It is no surprise by now that the global credit crisis, together with regulatory pressure and consolidation among the biggest US banks, will lead to smaller 2008 bonuses for Wall Street bankers, traders and money managers.
Compensation and executive recruiting firm Options Group estimates the average bonus worldwide will fall by almost half this year, a period when tens of thousands of employees have been fired. Options Group estimated 50,000 to 60,000 more jobs will be cut over the course of the bear market, according to a report to be published next week.
Individual payouts will vary widely, depending on location, business line and firm. Suddenly Bear and Lehman Brothers Holdings Inc executives who were recruited by other firms may enjoy an advantage over their counterparts at firms that survived the credit crunch.
“The fact is that retained professionals received guarantees from JPMorgan Chase, Nomura (Holdings Inc) and Barclays to stick around through the end of 2008,” Options Group wrote. “In the case of Lehman Europe and Asia, Nomura attempted to convince these professional to stay through 2009 as well with additional cash guarantees.”
Similarly, brokers at Merrill Lynch & Co Inc will fare better than their firm, which fled into the arms of Bank of America Corp. Merrill brokers have been offered up to 100% of their annual commissions from last year as retention bonuses.
Of course the collapse of Bear, which was forced into a fire sale with JPMorgan Chase & Co and Lehman, where a bulk of the business was acquired by Barclays Plc out of bankruptcy, has also been painful. More than 40% of these firms' employees lost jobs and have not reemerged at other banks.
Industry-wide, payouts will fall for the second straight year after soaring for four years. The deepest cuts will hurt employees in the hardest hit businesses, such as structured finance and mortgage-backed securities.
Other businesses will see relatively strong payouts. Commodities sales and trading bonuses will fall 25% to 30%, while foreign exchange traders may slip 15%.
Options Group based its projections on surveys of Wall Street employees and from company results.
In a separate report, compensation consultant Johnson Associates projected that bonuses for Wall Street's chief executives and top executives -- whose compensation must be disclosed to shareholders -- will tumble 60% to 70%.
But Johnson sees the average bonus falling by just 20%.
While payouts are coming down, Congress and state officials such as New York Attorney General Andrew Cuomo may find they still look pretty healthy.
Executives in the businesses that created collateralized debt obligations, which generated so much of the $500 billion in global bank writedowns this year and contributed to the market's meltdown, would see their bonus fall by 50% to 60% -- to $750,000.
Senior investment bankers who were not engaged in trading would see their bonus fall as much as 50% to about $1 million.
The most successful money makers are still expected to bring home the bacon. The Wall Street Journal earlier on Thursday reported the head of Phibro commodities trading, a unit of Citigroup Inc, is set to receive a $125 million bonus. (Reuters)