CITY BANKERS CHEER AS BONUSES RETURN
THE CITY is set for a return to the champagne-soaked days of old, after it emerged yesterday that bankers at Goldman Sachs and Morgan Stanley are on track for bumper full-year bonuses to rival those from the pre-credit crunch compensation heyday.
Goldman Sachs is on course to pay out up to $700,000 (£427,000) per employee out of a total compensation pot of around $20bn, based on analysts’ earnings forecasts for 2009.
That level of reward would be almost twice the $363,000 the firm paid each employee on average last year, and would top the $661,000 Goldman staff received in 2007, before the economic downturn tightened its grip on the global banking sector.
Analysts predict that Morgan Stanley could pay out between $11bn and $14bn this year, with Credit Suisse banking analyst Howard Chen forecasting individual pay packets of close to $340,000, the amount the bank paid its employees in 2007.
Goldman Sachs said its compensation principles had not changed from those set out by chairman and chief executive Lloyd Blankfein in May, when he insisted that “compensation should reflect the performance of the firm as a whole”. He also said the percentage of compensation awarded in stock should increase as an employee’s total pay packet rises, “in order for long-term performance to remain the overriding aspiration to realising full compensation”.
Both banks have introduced “clawback” provisions to allow them to recoup a proportion of compensation from employees who go on to behave in a way which damages the firm’s finances or reputation.
Goldman saw its profits leap by 20 per cent in the first quarter of the year, while analysts predict it will post record profits for the full year.
And while Morgan Stanley is expected to report a second-quarter loss later this month, according to consensus analyst forecasts from Thomson Reuters, this is partly the result of it having repaid $10bn of money from the US government’s Troubled Asset Relief Programme, a financial crutch to help banks through the downturn. Goldman has also repaid $10bn.
Other banks forecast to dish out bumper bonuses this year include Barclays, Deutsche Bank, JP Morgan Chase and Credit Suisse. All of them are expected to post healthy profits at the end of the year, in stark contrast to the likes of RBS and Citigroup, which are still being buffeted by the economic storm.