Million-dollar bonuses back at MNC banks

BONUSES paid by US banks back home may have raised the hackles of the Obama administration, but Indian employees working in MNC banks here have little to complain about. Information on the first round of payouts trickling in from four American banks suggests a return to the heyday of 2007 — or at least close to those levels — when fat paychecks raised few eyebrows. 

    Citi, JP Morgan, Morgan Stanley and Goldman Sachs have declared bonuses for 2009 over the past few days. Grapevine suggests that there are quite a few employees who have received million-dollar bonuses, but the banks are unwilling to share the details. Indeed, the number is higher than 2008. 
    This time, though, there is a rising trend of staggering the cash component over 2-3 years — a payment mechanism that enables companies to cushion their balance sheets, silence critics as well as retain staff. Also, unlike last year, when there was a major difference between performers and non-performers, the distinction has been less glaring this time, which also presages the opening up of the job market. 
    Citi has been the surprise of the lot. As in the recent past, the bank has made an exception for India and a few other geographies. Punished by markets globally, Citi has seen a flight of talent at senior rungs. In India, while its consumer finance arm has been battered by loan delinquencies, corporate and investment banking, along with treasury, has managed to ride out the downturn. Bonuses at Citi are much higher than in the previous year, though not on par with the pre-Lehman days. Also, much to the relief of employees, only a slice of the bonus has been paid in stocks. The stock component is 25-40%, much lower than Morgan Stanley and JP Morgan, said sources in investment banks who did not want to be named. More cos may defer cash payouts 
BONUSES paid by Morgan Stanley India are said to be 5-10% higher than what was paid in 2008. The bank has deferred the cash as well as the stock components of the payouts. Fixed salaries have gone up by around 15-20%. Deferral in the cash component was started last year. Incidentally, the stock portion of the incentive has gone up substantially. Some senior officials have received bonuses up to 75% in stocks, up from 30% last year. 
    Bank officials refused to comment on the matter. R Suresh, MD of head hunting firm Stanton Chase, said: "Globally, this was the last of the opportunities to pay bonuses. Banks have been increasing their fixed pay. However, bonuses have come down after the crisis. In India, the bonus levels for high performers in Citi and some of the other banks have seen a comeback from a moderate 2008 levels, but bonuses are not as high as 2007." 
    In the case of JP Morgan, bonuses have been around the 2008 level mark. On an average, stocks were at 40-50% of the bonus levels, which was around the same level as last year. At the senior level, the stock component was as high as 60%. Incidentally, the bank also has a deferred cash component that will be disbursed over a period of three years. The bank is also said to have given reasonable increment to employees. Asia, India in particular, is increasingly becoming important for MNC banks because of increasing revenues from the region amid a slowdown in the western markets. Firoze Patel, senior client partner, Korn Ferry International, said: "Banks are finding more innovative ways of paying bonuses. The worry would, however, be a herd mentality. There will be a domino effect, with each bank trying to be on a par. It will impact business." 
    Banks like Bank of America-Merrill Lynch (BofA-ML) and Credit Suisse will declare bonuses this week, while others like Standard Chartered are likely to do so in March. In the case of BofA-ML, it is expected that stock portion for senior management could be as high as 70%. 
    Standard Chartered has not yet decided on its bonus pool. However, average stock levels are likely to move up marginally. The bank is expected to give an average increment of around 12%, though increments in some of the divisions would be higher. HSBC staff are also expected to get a good deal. 
    Mr Suresh added that among segments that have done well are corporate and investment banking (CIB) division. Retail and wealth management has suffered the most. On the CIB front, corporate project finance, cash management and trade finance have performed well in terms of payouts. "More organisations will defer cash payouts as far as possible. Banks are likely to be more prudent, circumspect and also more innovative," Mr Patel added.