JPMorgan and Goldman Pay More than European Banks
JPMorgan Chase was the top payer among investment banks last year, awarding its senior employees a fifth more than Goldman Sachs, according to a report that also highlights a growing divide between firms based in the U.S. and Europe.
Managing directors in JPMorgan's mergers advisory and underwriting teams earned an average of £1.1 million ($1.7 million) in total compensation for 2012, according to Emolument, a London-based salary data provider. Morgan Stanley was the second-highest payer, with an average award of £903,000 , followed by Goldman Sachs at £873,000 .
By contrast, remuneration at European firms trailed, with the average at HSBC, Societe Generale and BNP Paribas amounting to less than £520,000. Firms in the region are struggling as the sovereign debt crisis hurts revenue, and regulators force them to hold more capital and limit bonuses, remuneration specialists said.
"There is a divide opening up between pay levels in New York and London," said Tom Gosling, head of the reward practice at PricewaterhouseCoopers in London. "Some of the European investment banks are scaling back heavily and having to accept that they can't pay people at the same level as U.S. firms.
Our company was started last year by Thomas Drewry, founder of executive search firm Veni Partners, and Olivier Beau de Lomenie, a former executive at online grocer Ocado.com, to provide companies with benchmarking data on remuneration.
Bankers using the service are surveyed anonymously on their compensation, allowing them to compare their pay with peers. The survey is based on responses from 190 managing directors at 12 firms. About 62 percent of those surveyed were based in London, and the rest were in Paris, Frankfurt, the U.S. and Asia, Emolument said. Kate Haywood, a spokeswoman for JPMorgan in London, declined to comment beyond noting the small size of the sample, while officials at the other firms declined to comment.
Managing directors' compensation represents less than five percent of the population and should not be thought of as the standard pay for investment banking employees, said John Purcell, chief executive officer of Purcell & Co., a London-based executive-search firm.
Firms typically don't disclose how much they pay individual bankers. Still, they do provide a figure for total staff costs at their investment banking divisions, from which it's possible to calculate an average amount. Such figures include everyone from administrative employees to senior executives. On that basis, average pay for all JPMorgan's 52,000 investment-banking employees was $217,000 in 2012, less than the $399,500 average for Goldman Sachs' 32,400 employees, according to data compiled by Bloomberg Industries.
JPMorgan, the biggest U.S. bank by assets, generated $5.77 billion in investment banking fees in 2012, down 2 percent from a year earlier, according to figures on the New York-based firm's website. That surpassed Goldman Sachs' $4.93 billion in investment-banking revenue and Morgan Stanley's $3.93 billion, according to figures reported by those firms.
Compensation at British lenders, including 81-percent state-owned Royal Bank of Scotland, was closest to the U.S. banks, the Emolument data show. Barclays, Britain's second-biggest lender, paid managing directors at its investment bank £815,000 on average and RBS £745,000, according to Emolument.
"Europe is still weak and banks are still wielding the axe, meaning compensation pools are far smaller and there are fewer questions asked when poor bonuses are announced," said Nick Sisnett, a consultant at recruiting firm Altus Partners in London. "This is likely to continue in the near term."
Fees for advising on mergers and managing stock and bond offerings in Western Europe fell 6 percent to $4.5 billion in the first quarter, while in the U.S. they jumped 16 percent to $10.2 billion, according to New York-based Freeman & Co.
French firms were among the lowest payers. Average total compensation for senior bankers at Paris-based BNP Paribas and Societe Generale last year was £516,000 and £509,000 respectively. BNP Paribas, France's largest bank, increased its bonus pool by 14 percent last year to 559 million euros ($731 million), the lender said in an April 26 statement.
The worst payer among the institutions surveyed was London-based HSBC, with an average award of £472,000. Citigroup was the lowest-paying U.S. firm, with average total pay for its managing directors of about £613,000.
"The U.S. financial services market is proving to be stronger than Europe at present and we're starting to see a growing disparity between salaries in London and New York," said Neil Owen, Global Practice Director at Robert Half Financial Services, a recruitment firm in London. "Banking and capital markets professionals in New York are earning as much as 25 to 40 percent more in base salary for the same role.
That gulf is likely to get larger as European regulators introduce stricter rules on pay. Bankers in the European Union will be subject to a bonus cap from 2015, restricting variable awards to less than twice base salaries. In March, Switzerland introduced laws giving investors a binding annual vote on board and executive pay.
Diverging regulatory approaches to compensation add to the challenge facing European firms, Huw van Steenis and Ted Moynihan, analysts at Morgan Stanley and Oliver Wyman, wrote in an April 11 report. The introduction of bonus caps in the EU and say on pay will put additional pressure on variable compensation and create further challenges for European banks globally as well as banks operating in Europe.
Emolument provides bonus and salary statistics based on data submitted directly by professionals like you. It is free, anonymous, and already a trusted tool for thousands of professionals worldwide. Are you paid enough? Click here to find out now.