The Banking and Strategy Initiative

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Is Deferred pay the next Crossroads for Investment Banking? | Bank insight

Even as Deal fees continues to plummet, 2012 looks like a return to health for most global banks except for units in Asia and Europe sold off for gains and better capital management by parent firms. Deals in Asia and growing back claws in housing and retail wealth markets are gooing to keep banks happy. However, the same may not be true for bankers. The industry wide compensation cuts have meant that Deutsche Bank paid only 37% of the bonuses in Cash and most have capped cash bonuses at below $150,000

Employees prefer less deferred compensation and more in hand. Bankers at Credit Suisse and UBS struck work and finally cash bonuses were given to those below a certain pay grade. Even as more government supported banks insert a pay cap , dealmakers leaave the industry and more churn is expected to keep a few months of the year blanked in production, those looking at hiring would increasingly find it difficult to recruit any talent without the cash bonus component esp the Directors and Vice President level senior bankers who will also not be promoted to Managing Director and other Executive levels and/or are sacrificing upto $300k each in cash bonuses on average for uncertain deferred component though some with bad assets or BAC equity may have found multi baggers again.

Average Compensation incl deferred has falled more than 15 % in most 2011 balance sheets incl 430k averages at Deutsche Bank , JP Morgan and Goldman Sachs while others are selectively pruning only trader salaries Morgan Stanley having brought that bonus pool to less than 30% in the latest quarters and keeping a 62% comp ratio in rthe retail banking and fund businesses

The equity Pop i banks will go back to Executive compensation and in a hurry if banks value their mid level and senior staff even as management boards have to make do with less. Entry level associates on the other hand still have guaranteed bonuses despite banks having reneged on the same since 2008.

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