Why Goldman Sachs and J.P. Morgan pay, why other banks don't so much

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You'll earn more working for Goldman Sachs or J.P. Morgan than for other banks. This is especially true if you work for either bank in London. Goldman Sachs, for example, pays each of its Fleet Street staff 40% more than the average it pays its people worldwide. New research from banking intelligence firm Tricumen helps explain why.

Using its proprietary data, Tricumen has calculated the productivity per head of front office staff in different divisions of major investment banks in Europe the Middle East and Africa (EMEA) and the U.S. The results are shown in the charts below.

Goldman Sachs and J.P. Morgan bankers are far more productive than bankers at other firms in EMEA

Tricumen's research suggests Goldman Sachs bankers working across capital markets (defined as sales and trading and M&A and equity and debt origination) are around 2.8 and 1.6 times more productive than the market average. By comparison, EMEA capital markets professionals at Citi, RBS, SocGen, BNP, Credit Suisse, Deutsche and UBS are a lot less productive than the average (and need to shape up, or be cut back). And the productivity of capital markets professionals at Barclays and HSBC is about normal.

The huge productivity disparity makes it unsurprising that Goldman and J.P. Morgan are so generous in London. As the bar chart (based on pay for risk takers in 2015) shows, Goldman pays its London risk takers more than twice as much as Citi - which is hardly surprising given that Citi's front capital markets staff each produce around a third as much in revenues.

Operating revenue / Front Office headcount (FTE, 2016), EMEA Capital Markets 

Tricumen EMEA overall

Source: Tricumen 

Source: Banks' Pillar 3 reports

Bankers' overall productivity is more equitable between banks in the Americas 

If London bankers' deserve the huge discrepancies in their pay, Tricumen's research suggests big variations are much less justifiable in the Americas. Here, Goldman Sachs bankers are still super-productive and J.P. Morgan bankers are a bit more productive than the rest, but across U.S. capital markets overall bankers at most other players tend towards the average.

Operating revenue/front office headcount (FTE, 2016), Americas Capital Markets 

Americas Tricumen

Source: Tricumen 

Citigroup's fixed income traders are the most productive in EMEA, J.P. Morgan's are the most productive in the Americas 

The high level discrepancies in capital markets productivity are also evident in fixed income currencies and commodities (FICC) sales and trading, where variations are again biggest in EMEA. Here, Tricumen says Citi's fixed income traders are by far the most productive and that Morgan Stanley's EMEA fixed income traders are by far the least. In the Americas, the fixed income productivity prize goes to J.P. Morgan and the loser is Citi.

Operating revenue / Front Office headcount (FTE, 2016), FICC EMEA 

FICC bankers EMEA

Source: Tricumen

Operating revenue / Front Office headcount (FTE, 2016), FICC Americas

FICC Americas

Source: Tricumen

Morgan Stanley's equities traders are super-productive everywhere. J.P. Morgan's are pretty-productive in EMEA 

Lastly, Morgan Stanley's equities traders deserve to get paid even if its (European) fixed income traders don't. As the charts below show, the U.S. bank's equities traders are far more productive than the average everywhere. However, they're especially productive in the Americas, where each Morgan Stanley equities traders generates revenues twice as high as the average. It's unfortunate then that Morgan Stanley cut the bonus pool for its equities traders this year

Goldman Sachs's equities traders are also super-productive. Credit Suisse, as usual, is the laggard.

Operating revenue / Front Office headcount (FTE, 2016), equities, EMEA

EQuities tricumen

Source: Tricumen

Operating revenue / Front Office headcount (FTE, 2016), equities, Americas

Morgan Stanley equities Americas

Source: Tricumen

Contact: sbutcher@efinancialcareers.com

Photo credit: Strong Man is Strong by Lauren Mitchell is licensed under CC BY 2.0.

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