JPMorgan has reported its fourth quarter and full year results for 2020. It won't be announcing bonuses to staff until next week, but based upon today's figures bonuses probably won't be great. - Although profits at JPMorgan's corporate and investment bank (CIB) rose 43% last year, spending on compensation was up a mere 4%.
The pattern was repeated in the fourth quarter, when bonuses are typically accrued. Compensation spending in JPMorgan's CIB actually fell 18% compared to 2019.
The compensation figures are causing apprehension among JPMorgan's bankers and traders who are facing a salary freeze at vice president level and above. "As suspected, they seem to transferring money to shareholders rather than giving employees a share," says one executive director. "This benefits the share price and is good for managing directors with vested restricted stock units. There was no need to freeze salaries across the board - they could have used some of $2.9m of reserves they released to pay employees."
The squeeze on compensation comes after a record year in the corporate and investment bank. - Fixed income markets revenues rose 45%; equity markets revenues rose 33%; equity underwriting revenues rose 66% and debt capital markets revenues rose 23%. Only M&A advisory revenues didn't rise by double digits - they were flat on 2019.
In notes accompanying its results, JPMorgan said credit, currencies and emerging markets traders did well in its fixed income division and that cash equities and equity derivatives traders also had a strong final quarter. The bank outlined growth plans for 2021, saying that it wants to hire bankers and advisors and to expand the asset management business and corporate and investment bank in China.
2020's excellent performance in the corporate and investment bank is not expected to continue, however. JPMorgan said the return on equity in the CIB is expected to be around 16% this year, down from 20% in 2020.
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