How Have Write-Offs Affected Your Firm's Bonus Pool ?

We've been wondering exactly how much bigger staff year-end bonus pots would be for bankers if it wasn't for those huge recent write-downs for CDOs, asset-backed securities, other structured products and LBOs in recent weeks.

So, for those firms which have had the biggest write-downs, we've taken the approximate headcount number in investment banking and divided it by 50% of the amount written down (firms traditionally allocate around 50% of revenues to bonus pools). Now, we appreciate that, in reality, 50% of the write-down figure won't come straight out of  bonus pools (firms will generally appreciate that they still need to pay key staff well for retention purposes). Nevertheless the figures make for an interesting comparison.

Here are the results:

Citi - $209,302 in average bonus lost per employee

UBS Investment Bank - $137,500

Bank of America - $135,000

Barclays Capital - $90,000

Deutsche Bank - $87,000

Bear Stearns - $66,666

Merrill Lynch - $62,500

Credit Suisse - $46,798

Morgan Stanley - $33,636

JPMorgan Chase - $32,800

Goldman Sachs - $31,250

Lehman Brothers - $15,217

Despite all the doom and gloom about bonuses, though, Bloomberg is still predicting that this year will still see record payouts. According to data compiled by the news agency, the average bonus for the 186,000 staff working at Bear, Goldman, Lehman, Merrill and Morgan Stanley will be around $201,500. As can be seen from the figures above, Bear and Merrill might not have as much dosh to play with at year-end, but Charles Geisst, finance professor at Manhattan College in New York, is quoted by Bloomberg, saying that 'they're all going to have to fall in line. If Bear and Merrill plead poverty, they're going to lose all of their good people'.


'Things can't be that tight at Merrill. Incoming CEO John Thain has just been given a $15m all-cash signing on bonus. He is also expected to earn a minimum of $50m a year for the next five years'.

'Don't forget you will have to account for the amount of money allocated for severance packages!'.

'Subprime is mainly a US issue. EMEA and Asia have generally performed well, so there should be regional variations in bonus pools (whether there will or not, remains to be seen!).

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