Banks

Pay rises for senior bankers hit 10%

Daniel Schäfer
WATCH LIVE

Banking chief executives received an average pay rise of 10 per cent last year as US banks handed their heads much more generous packages than their European rivals, highlighting the widening remuneration gap on either side of the Atlantic.

The analysis of total pay awarded to the heads of 15 banks – including Goldman Sachs' Lloyd Blankfein and Lloyds Banking Group's António Horta-Osório – was exclusively compiled for the Financial Times by Equilar, a US pay research group.

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Lloyd Blankfein, chief executive officer of Goldman Sachs Group Inc. and Brian Moynihan, president and chief executive officer of Bank of America Corp., speak to the media after a meeting with U.S. President Barack Obama at the White House in Washington, D.C.
Andrew Harrer | Bloomberg | Getty Images

It shows they took home $13 million on average in 2013, 10.1 per cent more than in the previous year, more than compensating for a drop the year before and taking average pay levels back to slightly above 2011.

The pay rises came in a year when banks paid record fines in the US for wrongdoing ranging from mis-selling mortgages to violating US sanctions. The 15 banks paid $48 billion in fines last year, up from $30 billion in 2012, according to an FT analysis.

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However, the jump in pay also coincided with an average increase in net income of 46 per cent during the year and strong share price performance, especially in the US.

The KBW index of US banks – which excludes Goldman Sachs and Morgan Stanley – was up 35 per cent, compared to a 30 per cent rise for the S&P 500. The Eurofirst 300 banks index rose by 18.1 per cent during the year, outperforming the FTSE All World index by 2.71 per cent.

The share price of all but four of the banks – Barclays, Deutsche Bank, Royal Bank of Scotland and HSBC – outperformed the FTSE World index.

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The main reason for higher average pay was a big jump in rewards for chief executives at US banks, who were catapulted into an entirely different league compared to their peers in Europe.

"These are just two different markets now in terms of the senior management," said Tom Gosling, head of PwC's reward practice.

All six US bank chief executives included in the analysis – from Mr Blankfein to Jamie Dimon at JPMorgan Chase – ranked among the seven best-paid bankers.

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After a 50 per cent increase in his pay package to $19.9m, Mr Blankfein toppled Wells Fargo's John Stumpf as the highest paid bank chief.

Even the lowest-paid US bank head, Mr Dimon, took home $11.8m after a 37 per cent pay cut mainly due to sharply lower equity-based awards that reflected the "London Whale" trading debacle in 2012.

In Europe, a mixture of regulatory and political pressure, lower revenues and a strategic shift away from investment banking led to the emergence of a new breed of lower-paid bank chiefs.

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Ross McEwan, the New Zealand-born retail banker who has led RBS since last autumn, epitomised this trend: his pay package of $4m – the lowest of all 15 – was a fifth of Mr Blankfein's.

Analysts expect the gulf to widen even further as more banks retrench from high-paying investment banking businesses and as a European Union bonus cap forces many lenders to cut the pay for top management.

The analysis by Equilar added up base salaries, cash bonuses and various other benefits. It also included option and stock awards that were granted in 2013, some of which were to reward performance in previous years.

Among the UK lenders, Mr Horta-Osório was the best paid with a $12.5m package, an increase of 17 per cent on a year earlier. It came in a year in which Lloyds posted its first increase in pre-tax profit in three years and in which its share price rise of more than two-thirds beat all 15 banks.

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