JPMorgan to cut trader pay, asset managers get raise

, Daily Business Review


JPMorgan Chase & Co. paid investment bankers and traders about 3 percent less in 2012 as shaky economies in the U.S. and Europe put a damper on deals, said two people with knowledge of the firm's compensation.

Portfolio managers and other executives in asset management received an average 6 percent increase in salary and bonuses, according to two other people briefed on pay at New York-based JPMorgan, the largest U.S. lender by assets.

Senior investment bankers and traders had braced for steeper reductions exceeding 10 percent, one person said, after global deals slid 13 percent to $2.67 trillion in 2012. Net income at JPMorgan's investment bank for the first nine months of 2012, before it was merged with the corporate bank and treasury services divisions, dropped 15 percent to $5.2 billion.

The cuts pale next to those inflicted on JPMorgan CEO Jamie Dimon and on some peers at rival banks. Dimon's pay was halved after the bank suffered its worst-ever trading loss in the so-called London Whale episode. Top employees at UBS, Switzerland's biggest lender, will take a 7 percent reduction in their bonus pool and get paid with bonds whose value could be wiped out.

Senior executives at JPMorgan bore a heavier share of bonus cuts in the investment bank to insulate junior and mid-level staff from harsher reductions, said one of the people, who requested anonymity because pay discussions are private. Joe Evangelisti, a company spokesman, said the firm had no comment. JPMorgan paid the approximately 26,000 employees in its investment bank an average of $314,980 for the 12 months ended Sept. 30, the most recent data available.

Pay Levels

Average pay per worker doesn't reflect the amount of money employees actually receive. Top executives and revenue producers sometimes get multimillion-dollar awards, while clerical workers are paid smaller salaries.

JPMorgan's U.S.-based employees received the cash portion of their 2012 bonuses on Jan. 22, according to two people. The highest-paid executives receive about 50 percent of their bonus in cash and the rest in deferred stock awards and stock options, one of the people said. Most senior officers, senior vice presidents in the retail bank and managing directors on the broker-dealer side receive at least 35 percent in equity.

Employees whose total compensation fell by 10 percent or more are generally among the weakest performers and at the highest risk of losing their jobs, said one person.

Performance Pay

Fee revenue from mergers and acquisitions fell 17 percent for the year while equity underwriting fees tumbled 13 percent. The company stopped reporting profit for investment banking activities after the division was combined with corporate lending and cash management services in the fourth quarter.

Record-low corporate financing rates and a resurgence in investor confidence late in the year helped propel debt deals and trading to record highs. That saved JPMorgan bankers and traders from more drastic bonus cuts and boosted debt underwriting fees 13 percent for 2012 to $3.3 billion. Fixed-income trading rose 4.3 percent to $15.4 billion.

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