Bankers Face Zero Bonuses, Limits on Cash Payments, Report Says

By Joyce Moullakis

Nov. 27 (Bloomberg) -- About a quarter of bankers in Europe will get no bonus this year as governments that have bailed out the industry clamp down on pay, a survey said.

Financial services companies may also cap cash payments to workers and pay a bigger proportion of bonuses in stock, according to a survey of bankers at 30 firms by London-based recruitment firm Armstrong International. Those bankers that do get a bonus face an average 60 percent cut, the report said.

“This year there is across-the-board disappointment and acknowledgement that bonuses will be bad,” Matthew Osborne, managing partner at Armstrong, said in an interview. “There will be a lot of zero bonuses that will be shared around divisions.”

Banking chiefs are slashing pay as the industry, facing the worst financial crisis since the Great Depression, comes under heightened scrutiny after taxpayer-funded bailouts across Europe. U.K. bankers have reaped more than 31 billion pounds ($47 billion) in bonuses over the past four years, according to the Centre for Economics and Business Research. Barclays Plc said Nov. 18 it won’t pay bonuses to top executives after similar moves by Goldman Sachs Group Inc., UBS AG and Deutsche Bank AG.

Banks and brokers have posted writedowns and credit losses of more than $700 billion and eliminated almost 164,000 jobs since the start of the credit crisis last year, according to data compiled by Bloomberg.

Even the “very top” performers will get either the same bonus as 2007, or a cut of up to 30 percent, the report said.

Corporate Finance Pay

Corporate financiers face a median 70 percent cut in their bonus, with even top performers seeing reductions of 30 to 50 percent, the report said. Most structured credit traders will receive no bonus, or see their payment slashed by as much as 80 percent, the survey found. The average cash equity trader will get 55 percent reduction. Private bankers and foreign exchange dealers may escape the worst of the cuts, Osborne said.

BNP Paribas SA, Europe’s third-biggest bank, may lower bonuses by more than 70 percent at its corporate and investment bank after profit plunged in the first nine months of the year. Most employees will have their bonuses reduced, more people than in the past will receive no bonus at all, and even the “best performers may be affected,” Jacques d’Estais, the Paris-based head of corporate and investment banking, wrote in a Nov. 13 internal memo obtained by Bloomberg News.

Other banks may follow UBS and fund a greater proportion of bonus payments with stock. UBS, the Swiss bank that got a $59.2 billion rescue from the state and central bank, said starting next year it will be able to claw back bonuses in the years after their award. As much as a third will be paid immediately, while the rest will be put into a participant’s account and can be reduced if there is a loss at the division or the whole bank.

“People are expecting a significant percentage of stock,” the report said. “Going forward, the way bankers are paid will change for the foreseeable future.”

To contact the reporters on this story: Joyce Moullakis in London at jmoullakis@bloomberg.net