Did your firm increase base pay in the last couple years? Then you and/or the guy/girl to your right might be getting laid off.

Back in 2009, when out-of-sight Wall Street bonuses became public enemy No. 1, bankers dealt with the problem in their own ingenious way: They significantly raised salaries and deferred bonus payouts. Those moves helped defuse (or, at least, confuse) the mob, but now they're coming back to bite the banks. That's because the salary increases have left the banks with elevated fixed costs at a time of stagnant revenues. The situation, J.P. Morgan Chase & Co. analyst Kian Abouhossein pointed out in a report Tuesday, is a formula for "material staff cuts."

The cuts could be most severe at Credit Suisse and UBS, which appear to have the highest fixed compensation costs. At Credit Suisse, 81% of compensation costs are fixed, Mr. Abouhossein said, and at UBS the figure is 63%. That's a big change from just two years ago, when 63% of Credit Suisse's compensation costs were fixed and 55% at UBS...Morgan Stanley also could be in a "tight spot" and require restructuring, particularly in its fixed-income trading division, Mr. Abouhossein wrote. Morgan Stanley has invested heavily in trading over the past couple of years, installing new management and hiring some 400 sales and trading staffers to recapture business lost to bigger banks. It typically takes time for this sort of recruiting effort to pay off, and it certainly doesn't seem to have yet for Morgan Stanley, which generated only half as much trading revenue last year as industry leaders like Deutsche Bank or Goldman Sachs.

[Crain's via BI]