“There’s still fierce competition for investment bankers because the advisory boutiques have grabbed a lot of market share and can hijack top talent from the big banks,” said Bell, who heads the investment-banking practice. “So the full-service banks still have to pay more than they’d like to for their bankers. The same isn’t true for traders as trading revenue and profitability have shrunk and you still need big balance sheets to be successful.”
Cash Bonuses
Another change since the crisis is in the makeup of compensation. Big earners used to get relatively small salaries and much larger cash bonuses. Salaries have gone up, while cash bonuses have shrunk. The European Union even passed legislation that restricted the size of a banker’s bonus relative to salary. And bonuses in Europe and the U.S. are now mostly in the form of deferred stock awards, with the aim of aligning an employee’s long-term interests with the well-being of his or her firm.
At Goldman Sachs, the $27 million cash bonus accounted for almost half of the CEO’s compensation in 2007. Last year, it was $5.7 million, or about a quarter. Deferred compensation also prevents top earners from leaving easily.
“I’m forever talking to bank executives who want to get out, but they can’t walk away from their stock that hasn’t vested,” said John Burr, managing partner at executive-search firm Westcott Black Partners. “And other financial firms are looking to hire talent from the banks, but they balk at buying senior people’s deferred comp.”
At a few of the largest banks, per-worker compensation has risen in the past decade, with the biggest increases at Bank of America Corp. and Barclays Plc. Barclays has been shrinking its retail footprint globally, including a 2017 exit from Africa that eliminated 40,000 lower-paid positions. Also, the British pound’s 20% decline against the dollar and several other currencies over the past 10 years has increased payroll costs in the U.S. and Asia, which account for more than a third of the bank’s headcount.
Bank of America closed more than 1,000 branches around the U.S. and cut some 80,000 jobs after the crisis. It’s also reduced back-office jobs that could be replaced with technology, while hiring pricier client-facing employees, contributing to higher per-employee compensation. And Bank of America gave employees special bonuses following the Trump administration’s corporate-tax cut, and increased its minimum hourly pay.
Wells Fargo & Co., which is focused mostly on consumer banking and has a relatively small investment-banking arm, has been adding compliance staff after a series of scandals related to the handling of its customers in recent years. Those positions are higher-paid than tellers or other branch personnel.
“Retail banking still requires a local presence,” said Jeanne Branthover, managing partner at recruitment firm DHR International. “People still like to go to the branch, so the banks still have tellers and wealth managers in branches, and some banks are expanding again. Pay was never as significant for the branch staff, but it’s been holding up too, rising along with average wages.”
This article was provided by Bloomberg News.