Just when everyone thought bonuses would be big, it turns out that they may not be, at least from 2011 on.
JPMorgan has issued a report, first referred to in today's FT, suggesting banks will need to cut both pay and headcount as a result of regulator changes.
Depressingly, the bank's analysts reached this conclusion even before new Basel Rules on hybrid capital were announced.
JPMorgan lists eight regulatory changes, shown in the first table below, which it says will impact selected investment banks as illustrated. Following the changes, Deutsche is predicted to have by far the lowest ROE - at just 6.7%, which is not good given that Josef Ackermann remains committed to a 25% target.
In order to achieve an ROE of at least 15%, JPMorgan says banks will have to adjust headcount and pay as shown in the second table.
Notably, Goldman bankers may have to do without some of their large packages in future. BNP Paribas investment bankers may also find their packages depleted, even though theirs weren't as large in the first place.
Deutsche, SocGen, BNP, and BarCap are all forecast to require additional redundancies. There is, naturally, no mention of JPMorgan.
Some of the best banks to work may yet prove to be Credit Suisse, UBS, and Morgan Stanley, with the latter two actually expected to increase pay per head.
Goldman is expected to remain the most remunerative place to work in future, but its marginal pay advantage will be less. And UBS could actually end up paying rather well.
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Source: JP Morgan