Bank Chiefs Enjoy Double-Digit Pay Rises

Daniel Schäfer in London

Top U.S. and European bankers, including JPMorgan Chase’s Jamie Dimon and Citigroup’s Vikram Pandit, have enjoyed double-digit annual pay rises averaging almost 12 percent, despite widespread falls in profits and share prices, Financial Times research shows.

Dimon said the bank will probably seek to claw back pay from executives responsible for $2 billion in trading losses.
Andrew Harrer | Bloomberg | Getty Images

The disclosure will stoke concern on both sides of the Atlantic over chief executive pay levels that has already led to several high-profile investor revolts, including at Citi and at Barclays . It comes as Europe’s leaders debate a cap on bank bonuses.

The analysis of total pay awarded to 15 bank chiefs by Equilar, a U.S. pay research group, shows they received an average 11.9 percent pay rise last year to $12.8 million, the second increase in a row. However, the pace of growth has slowed.

Bankers such as Brian Moynihan at Bank of America , Citigroup’s Mr Pandit and JPMorgan’s Mr Dimon enjoyed the largest gains.

Mr Dimon, whose reputation as one of the best managers in banking has been in a supposedly safe division of JPMorgan, topped the list for the second year in succession with a $23.1 million pay package that was 11 percent higher.

The analysis by Equilar adds up base salaries, cash bonuses and certain other benefits. It also includes option and stock awards that were granted in 2011, some of which to reward performance in previous years.

It shows that fixed salaries continue to rise while variable cash payments are sinking as regulators clamp down on bonuses. But average stock and option awards increased by 22 percent.

“Regulators try to prevent banks from taking the outsize risks that led to the financial crisis. But the problem is that shareholders still like outsize returns,” said Albert Laverge, head of the global investment banking practice at Egon Zehnder.

Mr Pandit’s pay soared to $14.9 million after the $1 salary of the previous two years was ditched. He had pledged constraint until the bank would return to profitability, which it did in 2010.

His pay package, which ranks in the middle of the FT survey, sparked an investor revolt at Citigroup’s annual meeting in April that triggered a wider shareholder uprising against executives’ pay levels in Europe and the U.S.

In the UK, Bob Diamond at Barclays came second in the survey with a $20.1 million pay package that was inflated by a contentious £5.75 million tax bill covered by his employer. António Horta-Osório was awarded total pay of $15.7 million in his first year at partly state-owned Lloyds Banking Group , thanks to a welcome package and despite giving up his cash bonus after a stress-related two months’ leave.

The European Union is debating a possible cap on bonuses that would maximize the variable payout at 100 percent of fixed salary.

Tougher regulation has prompted many banks to increase fixed salaries, defer large parts of bonuses and subject them to clawbacks in the case of future losses.

The average pay rise came in a year when the FTSE world banks index fell by a quarter, more than the overall world index. Only three of the 15 banks in the survey – Wells Fargo , BBVA and JPMorgan Chase – have outperformed the world banks index while none has beaten the general index.