Citigroup Said to Keep Bonuses Flat or Down for Traders, Bankers

Dec 19, 2013 12:00 am ET

Dec. 19 (Bloomberg) -- Citigroup Inc.’s bonuses for investment bankers and traders probably will be little changed or drop from last year as the third-largest U.S. lender seeks to reduce costs, a person briefed on the policies said.

Investment bankers could receive payouts that are close to flat compared with 2012, while traders and salespeople could get cuts of 2 percent, according to the person, who asked for anonymity to discuss confidential pay plans.

While revenue in the securities and banking unit rose 6 percent through the first nine months, the bonuses probably won’t rise as people will earn 5 percent to 10 percent less than they would have a year ago for the same amount of production, said another person with direct knowledge of the New York-based bank’s policies.

Chief Executive Officer Michael Corbat, 53, who took over 14 months ago, is squeezing expenses amid investor pressure to improve returns. Citigroup, which doesn’t break out compensation for the securities unit, cut bonuses as much as 10 percent last year, people familiar with the matter have said. Through the first nine months of 2013, investment banks that do disclose bonus pools for bankers and traders have reduced amounts set aside.

Compensation for Wall Street’s equities salesmen and traders probably rose in 2013, while total pay for employees in fixed-income units may be down 10 percent, according to Options Group Inc. The gains could be biggest for those in equity derivatives, while people in interest-rates trading and securitized products deal with a 19 percent drop, according to the November report from the recruitment firm.

Individual Variables

Citigroup’s individual bonuses will vary based in part on the results of the unit where each employee works, how revenue was generated and the riskiness of the activity, according to the two people. Traders get paid based on the revenue they generate, while investment bankers are paid on a broader array of measures, one of the people said.

Danielle Romero-Apsilos, a company spokeswoman, said the bank didn’t have any comment on its bonus plans.

Wall Street traders are bracing for additional changes to pay plans after five regulatory agencies jointly approved the Volcker Rule ban on proprietary trading earlier this month. The measure, intended to prevent banks from making risky bets with shareholder funds, requires that compensation arrangements not be designed to reward prohibited activities.

Goldman, JPMorgan

Securities and banking revenue at Citigroup rose 6 percent through the first nine months of 2013, excluding some accounting adjustments. Investment-banking revenue, at $2.94 billion through the first nine months, climbed 10 percent from the year earlier, according to filings.

Revenue from fixed-income markets fell 5 percent to $10.78 billion, while revenue from equity markets rose 24 percent to $2.48 billion, filings show.

Fourth-quarter revenue from capital markets and investment banking probably will fall short of last year’s final three months, Chief Financial Officer John Gerspach said Dec. 10. The bank will maintain discipline on compensation in the institutional business, which includes securities and banking, he said.

Average compensation cost per employee at Goldman Sachs Group Inc. fell 5 percent to $319,755 in this year’s first nine months, the company said in October. At JPMorgan Chase & Co.’s investment bank, it dropped 4.8 percent to $165,774.

Citigroup, which employed 252,000 people at the end of September including bank tellers and retail salespeople, doesn’t break out pay for the securities and banking segment. In October, the company said total expenses in its investment bank were down 3 percent from a year earlier, driven by job cuts and “lower performance-based compensation.”

--With assistance from Rick Green in New York. Editors: David Scheer, Nathaniel Espino