Feb. 7, 2012 -- Goldman Sachs CEO Lloyd Blankfein's bonus will be cut to $7 million this year from $12.6 million the year before, according to Equilar, an executive compensation data firm. Goldman's heaviest hitters, as as group, will see their bonuses reduced by almost half. They are but the most recent group of traders to feel the bite of Wall St. pay cuts.
Consulting firm the Options Group had predicted as much in a November report, saying it expected to see compensation at the biggest Wall Street banks sink by 27 percent to 30 percent to the lowest levels seen since the 2008 financial crisis.
"Obviously this is not a good year for Wall Street compensation and an awful lot of the pressure is going to fall on managing directors," said Brad Hintz, research analyst with Sanford C. Bernstein & Co. Bankers in the fixed income market and in credit trading, he said, would be hit hardest.
Goldman's earnings fell 58 percent in the last quarter of 2011. Revenue was lower than expected. Blankenfein in a January statement said the bank's results were the result of "global macro-economic concerns which significantly affected our clients' risk tolerance and willingness to transact."
In January, investment bankers at Bank of America were told to expect compensation cuts of up to 25 percent, according to Bloomberg.
Bank of America reported earnings of $2 billion in the last three months of 2011, up from a net loss of $1.2 billion in the same period a year ago, boosted in part from a one-time gain on the sale of China Construction Bank. During a conference call last week, Bank of America's CEO, Brian Moynihan, revealed the failed plan to impose a $5 debit card monthly fee contributed to a 20 percent increase in closed accounts in the last three months of 2011.
The top executives at JPMorgan Chase, Citigroup, and Morgan Stanley received stock award pay cuts of 15 to 25 percent after their shares took a beating in 2011. But their pay packages are still eye-popping for an industry that required a massive government bailout a few years ago.
JPMorgan Chase, whose profit fell 23 percent in the fourth quarter, saw stock bonuses fall for its top executives though the pay of CEO Jamie Dimon remained about the same.
The top 13 executives at JPMorgan Chase had a 15 percent cut in stock awarded, which is only a portion of executive compensation. Those executives received $60.9 million in restricted shares plus stock options, Bloomberg reported. Dimon's pay package was about $23 million.
In November, Dimon said he understood the frustration of the Occupy Wall Street protesters, who had camped outside where he was giving a speech. But he said large corporations contribute to the U.S. economy because they "pay their people more, are more diverse, with health benefits. It isn't like they're the bad actors here."
Figures from Equilar, an executive compensation data firm, show the executive stock awards at JPMorgan Chase, Morgan Stanley and Citigroup were lower this year.
The total compensation of Morgan Stanley's CEO James Gorman fell 25 percent from 2010 to about $10.5 million, Dow Jones reported.
Morgan Stanley reported a loss of $275 million in late January, the bank's first quarterly loss since early 2009, compared with a gain of $600 million a year ago in the same period, the Associated Press reported. The company's shares fell 44 percent last year, leading to a drop in pay for senior investment bankers and traders by 20 to 30 percent, Bloomberg reported.
Citigroup's full-year profit increased 6.4 percent in 2011, the second year the company was profitable under CEO Vikram Pandit. Last year, when the bank's shares fell 44 percent, Pandit had a base salary of $1.75 million and a retention plan valued at more than $40 million, Bloomberg BusinessWeek reported. In July, he received the remaining $80 million of the $165 million from Citigroup's buyout in 2007 of his hedge fund, Old Lane Partners LP.
In December, Pandit announced Citigroup will lay off 4,500 employees, about 1.5 percent of its 267,000 employees, for which the bank took a $400 million charge in the fourth quarter.
Options Group's November report predicted an average compensation decline globally of 33 percent in the investment banking sectors of fixed income, currencies and commodities; of 29 percent in the equities sector; and of 14 percent in investment banking. The only sectors that were forecasted to have increases, in the single-digits, were private wealth management and electronic trading.