European banks were asking for a slap when new rules on pay were unveiled last week. Just consider this year’s bonus round. Lower payouts had been predicted, reflecting the relative weakness of the business environment. In fact, pay for the average investment bank employee at Europe’s top four firms fell just 2 percent last year, to $313,000. Deferred awards cloud the picture, but there’s little sign of pay restraint.
Of the big four European investment banks, UBS paid out the most to its investment banking staff last year - $350,000 on average. That was only a 3.5 percent drop from the previous year, despite the Swiss bank’s $1.5 billion fine for Libor rgging. Average pay at Credit Suisse fell a mere 2 percent to $330,000. Barclays, which also settled with regulators over Libor, slashed deepest: pay fell 7 percent to just shy of $300,000. But compensation rose 5 percent at Deutsche Bank to $290,000.
The modest overall drop comes despite fees in the Europe, Middle East and Africa region slumping 16 percent, against a 5.5 percent rise in the Americas, according to Thomson Reuters data. Bank employees have understandably fared better in the United States, where pay was flat to up. All the same, one might have expected European bank bosses to show more contrition in the year that the Libor scandal erupted.
True, the proportion of compensation paid out of revenue has fallen across the board. Banks have also shed staff, leaving greater rewards for those who remain. And compensation data are muddied because about three-quarters of all banks’ numbers are comprised of salaries and deferred awards made in prior periods.
But it’s not as if shareholders are doing that well. Deutsche Bank and Credit Suisse intend merely to hold dividends per share steady from last year. Barclays has recommended a modest increase. UBS, in recovery mode, has offered a larger 50 percent bump, but that’s still only a paltry 0.15 Swiss francs a share.
The staggered nature of pay awards means it will take time for recent bonus reductions to showfully. But it looks bad that this was meant to be disappointing bonus round and overall pay numbers are barely down. No wonder the banks are being thwacked.
Dominic Elliott is a columnist at Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
