Wall Street banks plan to highlight caps on cash bonuses and cuts in the proportion of revenues paid out to employees in a rearguard action against the public and political assault on their bumper pay-outs.
Executives at the largest US banks, led by Goldman Sachs, are spending the long weekend putting finishing touches to financial reports for 2009, which will reveal whether the annual bonus season lives up to its billing as the most expensive on record.
Goldman Sachs, which has become a lightning rod for public fury over the taxpayer bailout, has slashed the money going into its bonus pool in an attempt to keep pay-out levels below their 2007 peak, analysts believe. And investors were quietly betting last week that the proportion of revenues handed to staff could turn out to be lower than published estimates, as banks strive to boost profits in the face of disappointing results from their trading operations in the fourth quarter of 2009.
The question is whether these moves will be enough to de-fang a ferocious attack on the industry, including the $117bn (£72bn) tax proposed by the Obama administration.
Goldman Sachs is expected to announce a compensation total of $16.7bn for the year on Thursday, including salaries and benefits as well as bonuses. That would be an average of $527,000 per employee, compared to $661,000 in 2007, but at 42 per cent of revenues it would represent one of the lowest proportions shared with employees since the company converted from a partnership. The bank has been under pressure from shareholders to boost earnings per share at the expense of employees.
Citigroup will be first with results this week, when trading resumes after the Martin Luther King Jr holiday, and it is believed to have told employees that their cash bonuses will be capped below $100,000, with any additional coming from stock. Morgan Stanley, Bank of America (which owns Merrill Lynch) and Wells Fargo all report on Wednesday. JP Morgan Chase reported last Friday that 2009 payments to staff at its investment bank averaged $378,600, a record but also accounting for the lowest proportion of revenues since the company was formed through a merger in 2004.
The return of bonuses to record or near-record levels has fuelled public anger over the industry's role in exacerbating a recession that has put one in 10 Americans out of work. Bailout costs to US taxpayers are expected to reach $117bn through losses on loans to banks, investments in the car industry and funds to help home owners. The new tax on Wall Street balance sheets is designed to recoup that money.Reuse content