Winners and losers in a “brutal” bonus season

Good years in banking are usually good for everyone, and bad years are usually bad for everyone, but every now and then you get a year like 2020, which looked like it ought to have been great, but which came along in conditions where top management felt the need to save money.  These are always the most difficult years to manage, because the strong markets mean that there’s always an alternative bid for top talent, but there isn’t enough in the pool to make everyone happy.  The result is, as one U.S. banker put it “Top ranked people are happy, bottom ranked people are furious”.

In actual fact, it’s a little more subtle than that.  Bottom ranked people are probably not all that furious now, because they will have been more likely to have got the message from the expectation management rounds back December. Although U.S. bank’s  bonuses are said to more differentiated than they’ve been for years, it’s been clear for at least six weeks that a small number of stars were going to scoop the pool.  The people who are going to take their envelopes hardest are the second and third deciles – solid, above-average performers who have almost certainly had their best year ever, but who are not judged to be franchise risks. 

This round is also demonstrating that in a year like 2020, there’s considerable differentiation between banks and regions as well as between individuals.  As always, the better the firm did, the less in evidence this differentiation is.  This is possibly best seen in Asia, where Bloomberg reports that Morgan Stanley appears to have been able to support a broad pyramid due to strong regional performance, and to have raised pools for both bankers and traders by 20%.  At JP Morgan, on the other hand, APAC investment bankers are reportedly only up 6% despite earlier suggestions that in sales and trading at least, bonuses might be up by 20%.  Citi’s Asian investment banking team might feel slightly disappointed by an apparent 3% rise, but they aren’t the worst off; globally, Citi’s equities bonus pool is thought to be flat on 2019.

This has been a hard year for bonus committees, and some of their decisions will be wrong.  The rankings are never exact, and perceptions of who the bank needs to keep and who might be a target for recruiters are often biased and out of date.  We can expect, however, that over the next six months, the weaker franchises will lose more talent to stronger ones than in the aftermath of a normal bonus season.

And if you didn’t get paid? The golden rule, as always, is to keep your dignity.  If you don’t like the number and think you can get better elsewhere, walk; otherwise, keep quiet.  After all, in a year in which everyone knows that top players have been looked after and mediocrities have been starved, how does it look to be going round telling everyone that you were one of the people who lost out?

Daniel Davies –


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