01-10-2010, 05:31 PM
Direct Action Resistance Fighter
Joined: Aug 2006
Record bonus pot at JP Morgan
Quote:The banking conglomerate, which will on Friday be the first Wall Street bank to report its fourth-quarter results, is on track to offer the record pay-out thanks to a resurgence in investment banking.
Analysts estimate that the world's biggest banks will pay more than $65bn to their staff over the next fortnight despite efforts by governments in Europe and the US to restrict excessive remuneration.
JP Morgan's pay-out looks set to be the highest ever offered by the bank. Based on analyst consensus, it will be 28pc up on 2008 and 2007 levels, in line with a 50,000 increase in staff, accumulated when it swallowed up Bear Stearns and Washington Mutual.
The investment bank's refusal to rein back bonuses is likely to be seen as an act of defiance both by the US and UK governments. Jamie Dimon, JP Morgan's chairman and chief executive, personally complained to Chancellor Alistair Darling over the new 50pc windfall tax on bonuses.
The US bank is also thought to be considering whether to drop its plans to build a European headquarters in London for £1.5bn because of the tax.
In an interview with The Sunday Telegraph before Christmas, Mr Darling made it clear that bonuses should be pared back.
He said: "Bonuses have been a symptom of the excessive behaviour of some banks over the last few years and even over the last few months."
It now looks like most Wall Street and City investment banks will absorb the cost of the Government's new 50pc windfall tax rather than cut back on remuneration. Wall Street's year-end bonus season will re-ignite fears that the financial services sector wants to go back to "business as usual" and has put behind it its role in bringing the global economy to the brink of a major depression.
"While the numbers will appear big, the story behind those numbers reflects changes many companies have made. These include a kind of 'pay for performance' that more closely links compensation practices to the long term success of the company," said Andrew DeSouza, of Sifma, the US investment banking body.
JP Morgan's 220,861 employees are on average set to earn $131,300 for the year, against $100,000 in 2008. However top performers in its investment banking arm will be much more highly remunerated.
A report by Andrew Cuomo, New York Attorney General, found that 1,626 JP Morgan bankers received bonuses of more than $1m in 2008 – more than any other Wall Street bank. The same study found JP Morgan's 200 best-paid employees took home $1.12bn, more than even Goldman Sachs, whose top 200 staff shared in $995m.
Close scrutiny will be paid to Mr Dimon's compensation, after he and most Wall Street chiefs took a pay cut. It was down from approximately $34m in 2007 to $19.7m in 2008.
JP Morgan was the recipient of $25bn of capital from the US Treasury's Troubled Assets Relief Programme (TARP), a matter that will not go unnoticed by American politicians.
Banking analysts forecast that JP Morgan will produce earnings per share (EPS) of 62 cent in the fourth quarter of 2009 – approximately equivalent to profits of $2.7bn – on revenue close to $27bn, up from a profit of $702m on revenue of $17.23bn in the same period a year ago.
In spite of the stronger financial environment, analysts expect the final quarter of 2009 may have not been as strong as the third quarter.
Jason Goldberg, an analyst at Barclays Capital, and Keith Horowitz, an analyst at Citigroup, recently downgraded their earnings estimate for JP Morgan's final 2009 quarter on a reduction in the size of its balance sheet, lower fee income and further credit deterioration.
A JP Morgan spokesman declined to comment on the results, which are expected to be bolstered by strength in its private equity division and Chase consumer franchise.
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