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Bonus Pain Is Dish Still Served Bold This Year on Wall Street, Credit Traders Frown; A Commodities Feast By AARON LUCCHETTI November 7, 2007; Page C1 Not everyone on Wall Street can define a collateralized…... Read more >

Bonus Pain Is Dish Still Served Bold
This Year on Wall Street, Credit Traders Frown; A Commodities Feast

By AARON LUCCHETTI
November 7, 2007; Page C1

Not everyone on Wall Street can define a collateralized debt obligation, but everyone from secretaries to the top brass will soon know how these beleaguered bond instruments will affect their paychecks.

Two compensation experts are set to release projections for bonus payments this year on Wall Street, and the numbers aren't pretty. One executive-search company, Options Group, projects bonuses will decrease 5% to 10% from last year, the first overall drop in five years.

Compensation consultant Johnson Associates has a rosier view, saying Wall Street bonuses will be flat, thanks to a relatively strong stock market and big profit gains in the first half of the year.

The pain (or relative pain, of course, since few are poor on Wall Street) won't be spread equally. Traders in stocks and commodities are expected to do better than those working with bonds and mortgages, and companies that have taken significant hits recently, such as Merrill Lynch & Co. and Citigroup Inc., could give smaller bonuses than those by more-successful rivals.

Both compensation companies say times are getting tougher on Wall Street and probably won't turn around soon. "The market has clearly softened, but virtually all of the problems are in one or two businesses," said Alan Johnson, managing director at Johnson Associates of New York. "Virtually all of our clients agree that 2008 will be harder."

Bonuses are a driver of job satisfaction. For many bankers and traders, bonuses can be five or 10 times larger than their base salaries. The average investment banker, for example, is slated to receive a bonus of about $2.25 million to $2.75 million in 2007, up about 10% from last year, Options Group says.

"With the way markets are going, banks are going to be careful about the way they compensate people," said Michael Karp, chief executive officer of Options Group, which plans to release its pay study next week.

Wall Street faces a dilemma this year. Revenues are under pressure, but if firms cut bonuses too much, top talent will leave for greener pastures, notably hedge funds, many of which have done well this year and are willing to pay up.

Typically, half of all revenue at firms such as Goldman Sachs Group Inc. and Morgan Stanley goes to pay employees. Investors and employees will get a preview of what is to come in mid-December when many big firms release their fourth-quarter and year-end results, which will show how much was set aside in fiscal 2007 for compensation.

Commodity Winnings

There are bright spots this bonus season. Commodities trading is having a big year, and stock and derivatives traders are doing pretty well, due in part to the oil- and gas-price boom.

However, in the bond market, the driver of a lot of profits in recent years, the dropoff could be severe. A senior seller of mortgage-backed securities will likely see a bonus of about $1 million, down from about $2 million in 2006, Options Group says. "If you're in the CDO business, you'll be dramatically down if you even have a job," Mr. Johnson said.

Still, it is probably too soon to start feeling sorry for the Wall Street crowd. Bonuses surged 15% to 20% last year and 20% in 2005, according to Options Group, which says its numbers for 2007 may change as it digests the recent impact of multibillion-dollar write-downs and CEO ousters at Merrill Lynch and Citigroup.

Some bankers "have had a wonderful year, but a lot of people have gotten slammed," said June Gottlieb, a senior managing director at Warburg Realty, a New York real-estate brokerage company. She says business is good, but some clients who work in finance are waiting until bonus season to see what they can afford.

Hold the Credit Crunch

Not everyone is feeling the hit. At San Pietro, an exclusive Italian restaurant in New York, co-owner Gerardo Bruno says the high-powered clientele often discusses huge market losses but still orders risotto with white truffles at $150 per plate.

Mr. Johnson's survey of 10 large investment and commercial banks shows they spent 57% of their pretax, precompensation profit on compensation and benefits over the first three quarters of 2007, down slightly from the same period in 2006.

Many analysts predict the bonus season this year and maybe next will include lots of restricted stock in lieu of cash, which these days may be scarcer than in recent years.

Options Group's projections call for an average 15%-20% decline in bonuses for people in bond and currency departments and a 10% rise for those in stocks. Those working in mortgages could see a 30% decline. People working in Wall Street firms' hedge-fund units may see slight declines, while investment bankers and those in private equity and venture capital will see bonuses increase 10%.

 

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Friday, December 26, 2003 SECTION: NEWS; Pg. 34 WALL STREET WINDFALLS A BONUS FOR CITY By Joanne Wasserman The guy from Wall Street told jeweler Pamela Sherbow he'd had a great year, complete with a "super-duper"…... Read more >

Friday, December 26, 2003
SECTION: NEWS; Pg. 34

WALL STREET WINDFALLS A BONUS FOR CITY
By Joanne Wasserman

The guy from Wall Street told jeweler Pamela Sherbow he'd had a great year, complete with a "super-duper" Christmas bonus.

So he wanted an appropriately "super-duper" gift for his wife.

He walked out of Fortunoff on Fifth Ave. with a pair of flashy, 8-carat diamond studs with a five-figure price tag.

"They sparkled," Sherbow said. "They more than sparkled."

So do the piles of money Wall Street bankers and investors are spending on luxury gifts like jewelry, fancy Manhattan apartments, houses in the Hamptons and cases of rare wine.

Wall Street bonuses increased by about 25% this year from 2002, according to state controller Alan Hevesi. Wall Street firms were expected to pay out $10.7 billion in bonuses, up from $8.6 billion in 2002.

For this year, that's an average bonus of nearly $66,800 to the 161,000 financial industry employees.

June Gottlieb, managing director of Warburg Realty Partnership, recently sold an Upper East Side apartment to a woman who "runs a trading desk at a major firm." Her six-figure bonus made her approval by the co-op board a slam dunk.

At Sherry-Lehman, an upscale liquor store on Madison Ave., "the high-end stuff has just been flying out of here," said Chairman Michael Aaron.

That would be cases of Dom Perignon champagne and Chateau Petru wine with price tags of $500 to $1,000 a bottle.

Then there was the 28-year-old high flyer with a $250,000 end-of-year bonus. He traded up from his one-bedroom in the West 70s to a spectacular $1.5-million Tribeca loft.

"It's a two-bedroom with a 600-square-foot living room and a stainless steel kitchen," said Scott Durkin, chief operating officer of the Corcoran Group.

The young man, said Durkin, "had never gotten a bonus. When he came into the [financial] business, bonuses were a thing of the past.

"He's a very, very junior guy now working his way up, and this was never expected."

Copyright 2003  New York Daily News

 

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