Wall Street bankers enjoy a £104bn pay bonanza as deal frenzy sparks war for top financial talent

Wall Street’s biggest banks hiked their pay by nearly 15 per cent last year as a frenzy of deal-making sparked a war for top financial talent.

JP Morgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup collectively doled out just over £104billion in pay and benefits in 2021 compared with the £91billion paid the year before.

JP Morgan was the biggest payer, shelling out £28.2billion, followed by Bank of America which paid out £26.5billion.

JP Morgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup collectively doled out £104bn in pay and benefits in 2021 compared with the £91bn paid the year before

JP Morgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup collectively doled out £104bn in pay and benefits in 2021 compared with the £91bn paid the year before

Citigroup paid £18.4billion in compensation, while Morgan Stanley doled out £18.1billion and Goldman Sachs £13billion.

The boom in pay, bonuses and other benefits came as banks looked to retain their workers following a record year that saw them rake in record profits amid a surge in mergers and acquisitions as well as more companies listing on global stock markets.

Deal-making last year hit its highest levels since records began, with over £4.3 trillion worth agreed during the year as low interest rates and cash injections into the economy from central banks provided easy access to debt to fund acquisitions.

The surge was a 64 per cent rise year-on-year and 54 per cent higher than in 2019 before the Covid-19 pandemic struck. 

It also sparked a boom in fees for investment banks, which last year totalled a record £115billion.

Most of the increased pay last year came in the form of fatter bonus cheques, rather than increased base salaries, which allow banks greater flexibility to cut back payments if earnings begin to decline, a scenario widely expected this year as the pace of deals begins to slow.

However, the ever-expanding wage bill and costs have been worrying investors, with Goldman’s profits for the fourth quarter of 2021 falling short of forecasts after its expenses jumped 23 per cent in the period to £5.3billion.

The bumper pay packets also follow growing frustration and protests about working hours at Wall Street institutions.




Goldman Sachs bankers in £13bn pay bonanza after stellar year of deal-making

Bankers at Goldman Sachs saw their pay boosted by a third last year – with the top rainmakers scooping multi-million pound bonuses.

The Wall Street giant’s 43,900 staff were handed a total of £13billion, up 33 per cent on 2020 after a stellar year of deal-making.

That equated to an average of £296,000 each – but it masks the fact that the top performers will have bagged eye-watering sums.

Goldman Sachs 43,900 staff were handed a total of £13bn, up 33% on 2020 after a stellar year of deal-making

Goldman Sachs 43,900 staff were handed a total of £13bn, up 33% on 2020 after a stellar year of deal-making

Some bankers who advised on lucrative deals were expecting their pay packages to jump by as much as 50 per cent.

The long-awaited bonus day, which perennially leaves the best-rewarded bankers gleeful and others in misery, came as Goldman announced record full-year revenues of £43.7billion, a figure that was up by 33 per cent on 2020. Profits of £15.9billion were more than double 2020’s figure.

The lender was boosted by its investment bank, which advised on a swathe of blockbuster mergers and acquisitions (M&A) as the pandemic prompted a wave of deal-making.

These included the Advent International-backed takeover of Britain’s Ultra Electronics by rival Cobham, and Clayton Dubilier & Rice’s purchase of supermarket Morrisons.

Fees from advising on M&A, initial public offerings and debt deals climbed by 45pc to £2.8billion.

But Goldman’s knock-out full-year results for 2021 were overshadowed by a disappointing fourth quarter. 

The bank undershot expectations in the last three months of the year, as the pandemic plundering began to tail off.

Goldman’s share price was down almost 7 per cent in New York.

Danni Hewson, financial analyst at AJ Bell, said: ‘Expectations were high off the back of last year’s boom in trading, and matching that has proved impossible.

‘Add in increased expenses and the need to shell out more to retain and attract talent, and the banking sector as a whole might be on track to dissatisfy this earnings season.’

Goldman’s chief financial officer Denis Coleman said: ‘Our philosophy remains to pay for performance, and we are committed to rewarding top talent in a competitive labour environment.’ 

Rising interest rates could help lenders out over the next year, Hewson said, as banks tend to be able to make more money by increasing charges on borrowers but paying savers less when rates are high.

But they may still struggle to repeat the bumper advisory fees that they made this year, she added.

David Solomon, the Goldman Sachs chief executive who has been known to DJ under the name DJ D-Sol, was hopeful for the year ahead.

He acknowledged that 2021 was an unusual year, but added: ‘Activity levels, given we’re in a very unusual macro environment, are going to continue to be reasonable as we start into this year.

‘You’ve still got a lot of volatility around the pandemic.’




THE BANKERS INVESTMENT TRUST: A steady Eddie with 55 years of rising dividends that investors can bank on

A week tomorrow, the board of global investment trust Bankers will confirm the final quarterly dividend that shareholders will receive for financial year 2021

Although the payment in monetary terms will be small – probably 0.55 pence per share – it will mark another year of dividend growth (of around one per cent) for the £1.6 billion trust. 

With 55 years of annual dividend increases then behind it, Bankers will be on a par with City of London as the investment trust with the longest record of dividend growth. 

‘It’s a modest dividend increase,’ says Alex Crooke who has been overseeing the trust for the past 19 years. 

‘But in being cautious now, it means we can be more generous with our dividends next year. We’ve been living through lots of uncertainty.’ 

Both City of London and Bankers are trusts that are run by investment managers at Janus Henderson. 

What separates them, apart from having different managers at their helm (Job Curtis runs City of London), is that City of London is focused on the UK stock market while Bankers spreads its wings further afield. 

Over the past decade, Bankers has been steadily reducing its holdings in the UK – from 50 per cent to below 20 per cent of the portfolio – with the biggest remaining UK stocks being RELX, Diageo, Lloyds and AstraZeneca. 

The result is that its largest asset allocation is now in North America (35 per cent) while the trust’s top 10 holdings are all listed in the United States. 

It also has key geographic positions in Europe, Japan and the rest of the Pacific region. 

Although Crooke is the trust’s manager, he doesn’t pick the individual stocks, of which there are 165. 

His role is to determine the allocation of assets under the trust’s bonnet – he then gets Janus Henderson’s regional equity teams to run the money allotted to them. 

He also decides how much money the trust should borrow if he wants to increase its exposure to stock markets – new borrowings were taken out last year at an attractive interest of two per cent. The overall results are satisfactory, if not spectacular. 

Over the past year, total returns are around 10 per cent. ‘Any year when you are generating a return of 10 per cent or more is a good one,’ says Crooke. 

Over the past three and five years, returns are 64 per cent and 93 per cent respectively. 

Crooke is optimistic about the year ahead, although he says he would be surprised if investor returns exceed 10 per cent. ‘Between five and 10 per cent is what I am expecting, better than investing in fixed interest.’ 

The best market value, he says, is to be found in Asia and Japan – underperforming markets in 2021. 

The trust’s shares, currently priced at just above £1.20, stand at a small discount to the value of the underlying assets. 

Total annual charges are low at 0.5 per cent and the trust’s stock market ticker and identification code are respectively BNKR and BN4NDR3. 

The annual income it generates for shareholders is equivalent to around 1.7 per cent – modest, but growing.

‘Bankers is diverse, has holdings across the world, and is more cautious than some of its peers,’ says Crooke. 

This is demonstrated by the fact that over the past five years, some rival global trusts such as Scottish Mortgage and Monks (both managed by Baillie Gifford), have delivered far superior returns. 

Compared to these, Bankers is a steady Eddie. A suitable investment for first-time investors and for those happy to hold long-term and enjoy the rising stream of dividend payments.