JPMorgan revealed this morning that it has set aside $9.7 billion for compensation in 2010, an increase over last year's $9.3 billion.
But internally, managers have been working to manage bonus expectations. Employees in several areas of the bank have been told that they should expect bonuses to be modest.
The percent of JPMorgan's revenues going to bonuses is also increasing, rising to 35 percent from 33 percent a year ago. But the bank's headcount has grown as well, which means that the "average bonus" has fallen slightly. Of course, "average bonus" is pretty much a meaningless concept since no one actually receives it. It's just a figment of mathematical imagination, constructed by dividing the total bonus pool by the number of employees.
It seems clear that some of JPMorgan's investment bankers will take home sizable bonuses this year, despite the talk of compensation modesty. The firm's investment banking arm saw a decline in profitability due to increased performance based compensation. So while the investment bankers took in $6.2 billion last quarter—a rise from $5 billion a year ago—profits dropped from $1.9 billion to $1.5 billion. More money + smaller profits = bigger bonuses.
What everyone is waiting to see at JPMorgan is how the bonus numbers will shake out in terms of equity versus cash. There has been a lot of talk around Wall Street of trying to better align bonuses with the long term interest of shareholders by providing at least a good portion of the year's bonus in restricted stock.
At least some employees expect that a large part of the increase in bonuses will come in the form of stock, rather than cash. Not all of them are happy about that.
"You can't make down payment on a new apartment with a restricted stock option. This will make me live like the poors for another year or two," one young-ish banker told me.
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