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 Bonus Season: An Edwardian Tale of Two Wall Streets

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Number of posts : 440
Registration date : 2007-07-01

PostSubject: Bonus Season: An Edwardian Tale of Two Wall Streets   Sat Dec 01, 2007 1:21 pm

by Stephen Grocer
end of the year is nigh and that can mean only one thing — it’s bonus
season, that time of year when banks determine how to dole out to
employees some of the piles of cash they have raked in.
Street traders gather to protest bonus drop.” The photo and caption
have been making the rounds in the Wall Street email chain.

Wall Street firms have set aside almost $38 billion for bonuses this
year, a large chunk of which comes from Goldman Sachs Group — about $17
billion according to this Bloomberg article. In spite of this record amount, Reutersreports that
“not since 1998 will the gap between the haves and the have-lots be so
great.” That is in no small part due to the collapse of the mortgage
market. Yet as this Deal Journal postfrom
a few weeks ago points out, the losses suffered by the fixed-income
units of Wall Street banks have overshadowed the fact that other units
have performed quite well this year.With that in mind, Deal
Journal looked to see who will be getting coal in their stockings and
who will be getting a shiny new Ferrari. And instead of focusing on
those all too famous rankings of who worked on the highest total of
announced M&A deals — the League Tables (though you can see those
on the right) – we looked at actual revenue booked through Nov. 28 from
M&A-related activity of the top five banks on the global league
table (plus, one extra).Goldman Sachs: There
should be plenty of have-lots here. Did anyone expect anything else?
Goldman’s M&A advisory business generated $2.7 billion in revenue,
a 36.7% increase from a year earlier, according to the data. In the
U.S., it had a 64% increase in M&A advisory revenue. It also had
the largest jump – at 29.5% — in private-equity-related revenue (which
includes fees from M&A advisory, equity, debt and loan
underwriting) from the same period last year. (It couldn’t hurt that
Goldman Sachs Capital Partners has paid out the most fees this year.)Morgan Stanley: Its
M&A bankers should land in the have-lots category. The firm ranked
No. 2 globally and in the U.S. and No. 1 in Europe in revenue garnered
from M&A advisory work. The firm also had a 41% increase globally,
a 38% increase in the U.S. and a 35% increase in Europe. The question,
however, is how much the $3.7 billion hit that Morgan Stanley has taken
will weigh on bonuses.UBS: The
Swiss bank already told investment bankers and traders that their cash
pay will be capped at $750,000. Yet its European M&A bankers could
claim they belong among the have-lots. UBS generated $745 million in
revenue from the advice it handed out in Europe, according to Dealogic.
That is up 63% from a year earlier and is the reason UBS ranks third in
world-wide M&A advisory revenue. That is even more impressive given
the upheaval in its U.S. investment-banking business this year.J.P. Morgan Chase: It
has survived the mortgage market collapse relatively unscathed, so
there could be plenty of have-lots here, and it did rank No. 1 in
investment-banking revenue. Still it seems its performance lagged
behind that of its peers. Rivals Morgan Stanley, Goldman, UBS and Citi
all had a more than 30% jump in M&A advisory revenue amid the
biggest deal-making year in history. J.P. Morgan, meanwhile, had just
an 8.5% jump, according to the data. That helped knock it to No. 4 in
the rankings from No. 2 last year.Citigroup: Revenue
from M&A advisory work jumped 37.5% from last year to $1.4 billion,
according to Dealogic. But given Citi’s massive write-downs, it seems
doubtful there would be many have-lots here. In addition, other parts
of its M&A-related businesses didn’t fare so well either.
Investment-banking revenue rose only 0.3%. Why? Revenue from leveraged
financing — fees earned on leveraged loans as well as high yield bonds
– fell 23% and private-equity-related revenue slid 17.7%.Bank of America: Despite
the fact that BofA’s M&A advisory business generated 41% more
revenue in the U.S. than it did last year, there probably won’t be many
have-lots here. After all, the dismal performance at its
investment-banking unit in the third-quarter did cause CEO Ken Lewis to
say, “I’ve had all the fun I can stand in investment banking at the
moment.” Also, BofA’s leverage finance-related revenue and
private-equity-related revenue both slipped, 21.3% and 14.5%
respectively, according to the data.

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