European investment bankers are set to enjoy increased bonuses after a bumper year for trading and dealmaking amid the coronavirus pandemic, while their counterparts in other parts of the business see their payouts cut or cancelled altogether.
Credit Suisse and Barclays — the first of the region’s major investment banks to disclose their plans — this week boosted payouts and justified their decisions by citing “pay for performance” policies, and the need to stop staff defecting to more generous Wall Street rivals.
By contrast, staff at Italy’s Intesa Sanpaolo and Germany’s Commerzbank have had their payouts cut by as much as half. Lloyds Bank in the UK cancelled bonuses altogether.
More big global lenders will reveal their plans soon, with HSBC and Standard Chartered reporting full-year results on Tuesday and Thursday, and UBS releasing its annual report on March 5.
European bank bosses face a tricky balancing act between rewarding staff who capitalised on a boom in trading, listings and dealmaking last year, while acknowledging the bleak macroeconomic environment and seeking to avoid tarnishing the improved public image they have fought hard to rebuild since the financial crisis.
Thomas Gottstein, chief executive of Credit Suisse, told the Financial Times investment bankers at Switzerland’s second-biggest bank by assets received “double-digit” payouts, while the bonus pool for the whole group shrank by 7 per cent.
“That’s the essence of pay of performance,” he said, alluding to the investment bank’s 18 per cent annual increase in revenues.
Barclays increased its bonus pool by 6 per cent to £1.6bn after its investment bank produced its highest annual revenue since at least 2014.
While bonuses were cut in its corporate and consumer divisions where profits fell, they rose at the investment bank, where three-quarters of the pool was allocated to staff outside the UK, notably in New York. The bank’s traders were the main driver of profits last year and “we have to be responsive to that”, said Barclays chief executive Jes Staley.
Investment banks across the world generated a record $124.5bn in fees last year as companies raced to raise cash in order to survive the pandemic. Traders benefited from extraordinary levels of market volatility and unprecedented liquidity support from central banks, which drove clients to reposition their portfolios and sent stocks to record highs.
Regulators have been clear they will watch bonus payments closely. Last week the European Central Bank shot down Deutsche Bank’s plans to increase its bonus pool by more than a third, to more than €2bn, after Germany’s largest lender reported a small profit for the first time in six years.
When the ECB and Bank of England allowed lenders to restart dividend payments in December, they urged managers to use a “high degree of caution and prudence” when deciding on bonuses. This reflected the uncertain outlook and need for banks to deploy capital to the wider economy.
“Significant bonuses will be frowned upon,” said a senior British regulator. “It is always a nightmare when you have an investment bank — can you pay bonuses when the economy is doing badly?”
Carlo Messina, chief executive of Intesa Sanpaolo, said in an interview that Italy’s largest bank by assets was reducing its bonus pool by 30 per cent after its executives donated €6m of their own pay to healthcare initiatives last year.
“It is not only a decision of the organisation, but it is also something coming from the regulators,” he said. Intesa reported a €3.1bn profit for 2020 and benefited from an accounting gain after buying domestic rival UBI last summer.
Commerzbank, Germany’s second-biggest listed bank by assets, halved its bonus pool to €100m after recording a €2.9bn loss last year, its worst since the financial crisis.
Supervisors must “put the brakes on” excessive remuneration, said MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA. “Admittedly, banks did not cause the crisis this time. But they owe their successful year 2020 less to the genius of their managers than to the massive state support measures for the entire economy.”
Bank bosses are also coming under pressure from their shareholders to make sure bonuses do not draw too much negative attention. “Banks should be sensitive,” said Sacha Sadan, director of investment stewardship at Legal & General Investment Management, the UK’s biggest fund manager by assets.
“They should get bonuses if they have done a good job but they should be sensitive of the societal issues and mindful of why they have had a good year.”
A poll of 2,752 retail shareholders by Interactive Investor, the trading platform, showed 89 per cent would vote against “excessive remuneration” for bank executives at AGMs this year, down from 11 per cent last year.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
