Compensation consultant Johnson Associates projects that trader and IB bonuses will increase up to 15% from last year, although this is slightly less than the 17% growth the securities industry bonus pool experienced last year. Private equity bonus pools are expected to increase 20%+, mostly because of deal volume, but also because they’re still scrambling to match or out-pace IB (I know many PE firms were jacking up bonuses at the last minute last summer when partners got wind of projected IB comp for analyst and associate levels). Retail banking incentives are expected to stay relatively flat, with growth in the 0%-5% range.
Wall Street pay headed even higher – study [Reuters]

I bumped Lehman, after a slew of emails, comments and a couple of poisoned goldfish really brought Lehman’s planned comp package into focus for this year. Still no word on UBS, Credit Suisse, Lazard or SUNTRUST, but plug those holes (or bump those existing bonus numbers) by sending any info to: tips at dealbreaker dot com.

We already knew Bank of Montreal lost a bunch of money on natural gas trading, as the bank revealed to investors in late April that it had pretax commodity trading losses between C$350mm-C$450mm. This estimate turned out to be juuuuuust a bit outside, as BMO revealed today that pretax losses were actually C$680mm. Whoops. Fortunately, there were a few Hunter-esque figures to take the fall, from the Wall Street Journal:

The Canadian bank known as Bank of Montreal also said that two unnamed employees in the commodities-trading operations were placed on leave. They are no longer with the company. Oversight of the business has also changed, and new traders have been added to help reduce the portfolio’s risk.

The bank blamed (not oil prices and an unseasonably cold April for once) a quickly moving market combined with liquidity issues and historically low volatility.
A reader also just sent bonus figures for BMO based upon information from a former staffer ($90k/$110k/$130k), placing it at the bottom of the bonus barrel along with Lehman and Piper Jaffray so far.
Send those projected bonus numbers to: tips at dealbreaker dot com
BMO Raises Amount of Losses From Energy Trading [Wall Street Journal]

There aren’t any updates to the BonusBumer chart today (you can check the latest chart out here). We encourage you to send any new info, especially the missing pieces of the puzzle (there are several banks absent from the list), to “tips at dealbreaker dot com.” Instead of a bonus update, a bonus digression:
It’s actually remarkable that the banks risk reputational shortfall among the proletariat in the first place by not matching each other in terms of top bonus payouts. Where an individual analyst is hardly a blip on the value-add spectrum, in aggregate analysts keep the gears of a bank (or deal) moving, and without them banks would be left with MDs who actually had to print documents, model, make charts and perform logistical feats people making seven figures are utterly incapable of doing. For some reason that part of the brain shuts off when you make MD, even for the true sadists (cyborgs?) that are A-MD (yes, straight Analyst to MD promotes – we had 2 of them in our group, and they were just as unsympathetic to killing you on a project as everyone else). An analyst-free bank would quickly devolve into a Lord of the Flies-esque situation (documents printed with feces, human blood?), and it would only be a matter of time before the fat guy with glasses who runs equities would be thrown off a cliff.
As often noted, and what you find out quickly on bonus day if you have lips that aren’t permanently suctioned to your higher-ups, the bonus figure banks provide is for the very top of the top tier. The top keeps growing, just so banks can say they increased bonuses, but so does the deviation between the top bonus and the rest of the pack. Banks already have elaborate justification systems in place to swing this. JPMorgan, and I don’t know if they still call it this, implemented this thing called “The Star System” in order to justify paying the kid with the best attitude (loosest posterior, biggest toolbox, person who couldn’t find a job at the end of two years) the “top” bonus and then paying everyone else (people who actually told the staffer they got another job to be respectful rather than just quitting after getting the second year bonus number) a pretty fair deviation less.
Aside from the ability to smile during a prostate exam (or colonoscopy), there isn’t that much of a difference between analysts. The Star System, as I mentioned in my farewell email, was apt in that it usually did a good job of rewarding giant balls of hot flaming gas.
The question is, since banks already inflate the top why don’t they just match each other and not risk a “cheap bank” moniker (at least in terms of something pre-pooled and relatively controllable like analyst bonuses)? How imperfect is the information banks are given about other banks that they can’t pull this off? The real difference between a cheap bank and a happy, generous bank, is the deviation between the top bonus and the rest of the pack, and how closely the rest of the pack is clustered, which conveniently enough, can never be ascertained from the bonus figures banks provide.

The only real mover in the daily BonusBumper update is Wachovia, which several people pointed was not in the bottom bonus tier. This, according to the analyst program coordinator (den mother?), who at least said Wachovia was going to pay at the top of the market. Someone might want to tell this coordinator to relay to the higher-ups that Wachovia isn’t quite at the top of the market yet (bump that bonus!), and that the bank’s also committing the cardinal sin of breaking the $20k step rule. Maybe it’s a below the Mason-Dixon line thing?
Still no word on the notable absences – Credit Suisse, UBS, Bank of America, Lazard, SUNTRUST
Send any info to : tips at dealbreaker dot com
Here’s the updated chart, now with more tiers for your envious pleasure:

Last week we urged you to send in those projected end of year analyst bonus numbers. Here’s the info we received so far:

The sources for these range from staffers to analysts to just what random people have been hearing. Of course, SunTrust will inevitably top market, but right now Goldman and Merrill are the leaders of the pay pack, with Lehman, Piper Jaffray and Wachovia bringing up the rear. It’s interesting to note that, aside from the projected third year payouts of Merrill and Goldman, banks are staying with a $20k step function for top analyst bonuses in the second and third year. This is a much smaller percentage increase to when there was a $20k step function applied to the median first year bonus of $45k back in 2004.
There are still some holes to fill in (BoA, Credit Suisse, Lazard, UBS, SunTrust), so…
Send any updates, additions or corrections to tips at dealbreaker dot com.
We also encourage any info concerning buy side base and bonus payouts for firms that don’t graduate associates to a grown up bonus cycle, or from individuals who go straight to the buy side from college. I know my senior year the holy grail of recruiting pay-wise was to land one of the quant jock positions at Citadel or DE Shaw, which at the time paid $25k more base salary ($80k instead of $55k) and was rumored to provide $150k or so of total comp (opposed to the $100k you’d get if you got a $55k base and $45k bonus).