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View Count: 85 |  Publish Date: February 06, 2013
JPMorgan Said to Cut Investment Bank Pay 3%, Asset Managers Gain
By Dawn Kopecki & Jeffrey McCracken - 2013-02-06T05:00:24Z
JPMorgan Chase & Co. paid investmentbankers and traders about 3 percent less in 2012 as shakyeconomies in the U.S. and Europe put a damper on deals, said twopeople with knowledge of the firm’s compensation.
Portfolio managers and other executives in asset managementreceived an average 6 percent increase in salary and bonuses,according to two other people briefed on pay at New York-basedJPMorgan, the largest U.S. lender by assets.
Senior investment bankers and traders had braced forsteeper reductions exceeding 10 percent, one person said, afterglobal deals slid 13 percent to $2.67 trillion in 2012. Netincome at JPMorgan’s investment bank for the first nine monthsof 2012, before it was merged with the corporate bank andtreasury services divisions, dropped 15 percent to $5.2 billion.
The cuts pale next to those inflicted on JPMorgan ChiefExecutive Officer Jamie Dimon and on some peers at rival banks.Dimon’s pay was halved after the bank suffered its worst-evertrading loss in the so-called London Whale episode. Topemployees at UBS AG, Switzerland’s biggest lender, will take a 7percent reduction in their bonus pool and get paid with bondswhose value could be wiped out.
Senior executives at JPMorgan bore a heavier share of bonuscuts in the investment bank to insulate junior and mid-levelstaff from harsher reductions, said one of the people, whorequested 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 itsinvestment bank an average of $314,980 for the 12 months endedSept. 30, the most recent data available. Pay Levels
Average pay per worker doesn’t reflect the amount of moneyemployees actually receive. Top executives and revenue producerssometimes get multimillion-dollar awards, while clerical workersare paid smaller salaries.
JPMorgan’s U.S.-based employees received the cash portionof their 2012 bonuses on Jan. 22, according to two people. Thehighest-paid executives receive about 50 percent of their bonusin cash and the rest in deferred stock awards and stock options,one of the people said. Most senior officers, senior vicepresidents in the retail bank and managing directors on thebroker-dealer side receive at least 35 percent in equity.
Employees whose total compensation fell by 10 percent ormore are generally among the weakest performers and at thehighest risk of losing their jobs, said one person. Performance Pay
Fee revenue from mergers and acquisitions fell 17 percentfor the year while equity underwriting fees tumbled 13 percent.The company stopped reporting profit for investment bankingactivities after the division was combined with corporatelending and cash management services in the fourth quarter.
Record-low corporate financing rates and a resurgence ininvestor confidence late in the year helped propel debt dealsand trading to record highs. That saved JPMorgan bankers andtraders from more drastic bonus cuts and boosted debtunderwriting fees 13 percent for 2012 to $3.3 billion. Fixed-income trading rose 4.3 percent to $15.4 billion.
The firm rewards employees based on performance of theentire company, followed by their division, their unit and thentheir own personal results, said three executives. JPMorgan’s2012 profit rose 12 percent to a record $21.3 billion.
The asset-management division, which includes privatebanking, mutual funds and Highbridge Capital Management,produced a 7 percent gain in net income to $1.7 billion. Thathelped boost bonuses and wages by about 6 percent for portfoliomanagers, private bankers and traders in asset management, saidtwo people with knowledge of the matter. Price Paid
JPMorgan’s corporate division, which includes the unit thatproduced the bank’s record trading setback last year, lost $2.1billion, falling from a profit of $822 million in 2011. Thechief investment office lost more than $6.2 billion onderivatives in the first nine months of 2012, and most of thetraders and managers involved were fired or left. The leadtrader responsible was nicknamed the London Whale because hispositions were so large.
Other employees in the division were not necessarilypenalized for the loss, said one person familiar with their pay.
Total compensation expense in the broader division, whichincludes corporate functions like human resources and publicrelations, was up 13 percent for the year to $2.6 billion whilethe workforce expanded by a little more than half that rate to22,747 people, the company said when it reported earnings Jan.16. Total compensation costs include wages, bonuses, retirementcosts and other benefits. CEO Pay
JPMorgan’s board of directors sliced Dimon’s 2012 pay to$11.5 million, citing the 56-year-old CEO’s failure to properlysupervise the chief investment office and for allowing lax riskmanagement practices.
Companywide compensation expenses increased 5 percent to $7billion last year, the New York bank said last month. Headcountslipped to 258,965 employees from 260,157.
Pay reductions at competitors include Morgan Stanley’s 7.6percent cut in total compensation for investment bank employeeslast year. The New York-based firm is also deferring bonuses foremployees who have both total pay of more than $350,000 andincentive compensation of at least $50,000, a person briefed onthe matter said last month.
To contact the reporters on this story:Dawn Kopecki in New York at dkopecki@bloomberg.net;Jeffrey McCracken in New York at jmccracken3@bloomberg.net
To contact the editor responsible for this story:David Scheer at dscheer@bloomberg.net

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Time: 6:45  |  News Code: 117272  |  Site: bloomberg
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