Morning Coffee: JPMorgan's bankers to get the biggest bonus increase. What happens when a Goldman partner becomes your CEO
When it comes to bonuses, JPMorgan is usually like a Barbour jacket: enduring, expensive, understated. This year, it seems to be making a bit more noise.
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JPMorgan isn't saying anything, but after speaking to unknown persons inside the bank, Bloomberg is reporting that JPMorgan is planning to increase bonuses for its investment bankers by 15%. This is more than the 10% that Bloomberg says Bank of America will be increasing its own bankers' bonuses by. Anecdotally, it also seems to be more than the increases at Morgan Stanley.
What have JPMorgan's investment bankers done to merit their bigger bonuses? The bank is due to announce its fourth quarter results next Wednesday, but in the first nine months of 2024 JPMorgan's M&A revenues were up 8%, its equity capital markets revenues were up 44% and its debt capital markets revenues were up 55%. On this basis, its M&A bankers might be happy with a 15% increase; its capital markets bankers less so.
All will become apparent when JPMorgan announces its numbers next week. Bloomberg didn't disclose the bank's plans for its fixed income traders, who might be less happy given that their revenues fell by 2% in the first nine months. Market intelligence firm Tricumen says JPMorgan's credit and commodities traders underperformed.
Beyond JPMorgan, Bloomberg says Bank of America is planning a 10% increase for its bankers and traders and that Morgan Stanley has increased bonuses by 10% for its traders.
US banks' bonuses are watched carefully by European banks, which announce their own in February and March. If JPMorgan really does increase bonuses for its bankers by 15% this year, Deutsche Bank may want to start saving up: Deutsche's M&A revenues were up 58% in the first three quarters of last year and Deutsche bankers will want some love.
Separately, former Goldman Sachs partner Stefan Bollinger has arrived at his new job as CEO of Julius Baer, and he's wearing his signature trainers (sneakers if you're in the US).
He's also shaking things up a bit. Bloomberg reports that Bollinger has been horrified to find that people at Julius Baer appear incapable of making their own decisions and rely on management consultants instead. He wants employees to think for themselves and is reportedly cutting the consulting budget. It's a rude awakening for people who have outsourced their faculties to McKinsey and BCG.
Meanwhile...
Investment banking fees at Jefferies rose 73% in the fourth quarter. (Bloomberg)
Jefferies' president says: "What will drive corporate activity, private equity activity and overall investment banking and capital markets activity will be M&A and IPOs. We are in a positive and increasingly attractive period." (Reuters)
M&A revenues are sluggish though (capital markets revenues are thriving). RBC expects total M&A revenue to be just 2% higher than for the fourth quarter of 2023. Bank stocks may prove overpriced unless Trump delivers. (Bloomberg)
As rates rise, Bank of America could lose....$100bn on its securities portfolio. (Barrons)
A leading BlackRock private equity fund has lost more than $600mn on an investment in insurance outsourcing company Alacrity after the business struggled with its debt load. (Financial Times)
Nearly two-thirds of U.S. employers plan to add permanent roles in the next six months, according to a new survey by staffing and consulting firm Robert Half. Barely half of companies said the same midway through 2024. (WSJ)
“We are seeing increased demand for talent in private markets, including private equity, real estate and venture capital as firms seek expertise in deal sourcing and risk management.” (Financial News)
200,000 banking jobs - mostly in the back and middle office are likely to disappear due to AI. (Bloomberg)
Hedge funds Hamilton Lane and Welwing Capital are expanding in Dubai. (Bloomberg)
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