The terrible truth about the coming global redundancies
Sarah Butcher
It’s becoming harder to find a bank that hasn’t already laid off at least 10% of its staff. But with revenues still catastrophically low, headcount reductions to date could prove a pinprick compared to what’s coming next. Based on average pay per head for the year so far, we’ve calculated how many more people each bank would need to cut in order to maintain its international compensation ratio (compensation costs as a percentage of revenues) in line with 2007. The results range from the farcical (Merrill Lynch) to the disturbing (Credit Suisse), and the reassuring (Goldman and Morgan Stanley). While the vast majority of the cuts so far have been in the US and Europe, the layoffs required to maintain compensation ratio should make bankers in Asia nervous about the future, too.
Merrill Lynch
Revenues Q1-Q3: 2008 – $834m; 2007 – $19,442m
Compensation costs Q1-Q3: 2008 – $11,170m; 2007 – $11,564m
Compensation ratio Q1-Q3: 2008 – 1,339%; 2007 – 59%
Headcount Q1-Q3: 2008 – 60,900; 2007 – 64,200
Average comp per head: 2008 – $183k
Layoffs over the past year: 3,300
Layoffs required to maintain compensation ratio: 58,195
Credit Suisse (investment bank only)
Revenues Q1-Q3: 2008 – CHF2,736m; 2007 – CHF16,217m
Compensation costs Q1-Q3: 2008 – CHF5,682m; 2007 – CHF8,111m
Compensation ratio Q1-Q3: 2008 – 207%; 2007 – 50%
Headcount Q1-Q3: 2008 – 21,300; 2007 – 20,399
Average comp per head: CHF266k (US$228k)
Layoffs over the past year: None; 1,000 staff added*
Layoffs required to maintain compensation ratio: 16,161
Deutsche Bank
Revenues Q1-Q3: 2008 – €6,102m; 2007 – €14,620m
Compensation costs Q1-Q3: 2008 – €3,250m; 2007 – €5,217m
Compensation ratio Q1-Q3: 2008 – 53%, 2007 – 36%
Headcount Q1-Q3: 2008 – 15,574; 2007 – 17,215
Average comp per head: 2008 – €209k
Layoffs over the past year: 1,668
Layoffs required to maintain compensation ratio: 5,130
UBS
Revenues Q1-Q3: 2008 – minus CHF21,418m; 2007 – CHF11,065m
Compensation costs Q1-Q3: 2008 – CHF4,589m; 2007 – CHF8,326m
Compensation ratio Q1-Q3: 2008 – unquantifiable; 2007 – 75.2%
Headcount Q1-Q3: 2008 – 18,901; 2007 – 22,666
Average comp per head: 2008 – CHF243k (US$208k)
Layoffs over the past year: 3,765**
Layoffs required to maintain compensation ratio: Everyone
JPMorgan (investment bank only)
Revenues Q1-Q3: 2008 – $12,516m; 2007 – $14,998m
Compensation costs Q1-Q3: 2008 – $6,535m; 2007 – $6,404m
Compensation ratio Q1-Q3: 2008 – 52%; 2007 – 43%
Headcount Q1-Q3: 2008 – 30,989; 2007 – 25,961
Average comp per head: 2008 – $211k
Layoffs over the past year: None; 5,298 staff added
Layoffs required to maintain compensation ratio: 5,647
Morgan Stanley
Revenues Q1-Q3: 2008 – $22,881m; 2007 – $28,476m
Compensation costs Q1-Q3: 2008 – $10,726m; 2007 – $13,365m
Compensation ratio Q1-Q3: 2008 – 46.9%; 2007 – 46.9%
Headcount Q1-Q3: 2008 – 46,383; 2007 – 47,713
Average comp per head: $231k
Layoffs over the past year: 1,330
Layoffs required to maintain compensation ratio: No additional layoffs required
Goldman Sachs
Revenues Q1-Q3: 2008 – $23,800m; 2007 – $35,246m
Compensation costs Q1-Q3: 2008 – $11,424m; 2007 – $16,918m
Compensation ratio Q1-Q3: 2008 – 48%; 2007 – 48%
Headcount Q1-Q3: 2008 – 32,569; 2007 – 29,905
Average comp per head: 2008 – $351k
Layoffs over the past year: None; 2,664 staff added***
Layoffs required to maintain compensation ratio: No additional layoffs required
• *Between Q1 and Q308 vs. Q1 and Q307, excluding 500 layoffs announced in October
• ** Between Q1 and Q308 vs. Q1 and Q307; excluding 1,901 layoffs announced in October
• ***Between Q1 and Q308 vs. Q1 and Q307, excluding 3,200 layoffs announced in October
It’s becoming harder to find a bank that hasn’t already laid off at least 10% of its staff. But with revenues still catastrophically low, headcount reductions to date could prove a pinprick compared to what’s coming next. Based on average pay per head for the year so far, we’ve calculated how many more people each bank would need to cut in order to maintain its international compensation ratio (compensation costs as a percentage of revenues) in line with 2007. The results range from the farcical (Merrill Lynch) to the disturbing (Credit Suisse), and the reassuring (Goldman and Morgan Stanley). While the vast majority of the cuts so far have been in the US and Europe, the layoffs required to maintain compensation ratio should make bankers in Asia nervous about the future, too.
Merrill Lynch
Revenues Q1-Q3: 2008 – $834m; 2007 – $19,442m
Compensation costs Q1-Q3: 2008 – $11,170m; 2007 – $11,564m
Compensation ratio Q1-Q3: 2008 – 1,339%; 2007 – 59%
Headcount Q1-Q3: 2008 – 60,900; 2007 – 64,200
Average comp per head: 2008 – $183k
Layoffs over the past year: 3,300
Layoffs required to maintain compensation ratio: 58,195
Credit Suisse (investment bank only)
Revenues Q1-Q3: 2008 – CHF2,736m; 2007 – CHF16,217m
Compensation costs Q1-Q3: 2008 – CHF5,682m; 2007 – CHF8,111m
Compensation ratio Q1-Q3: 2008 – 207%; 2007 – 50%
Headcount Q1-Q3: 2008 – 21,300; 2007 – 20,399
Average comp per head: CHF266k (US$228k)
Layoffs over the past year: None; 1,000 staff added*
Layoffs required to maintain compensation ratio: 16,161
Deutsche Bank
Revenues Q1-Q3: 2008 – €6,102m; 2007 – €14,620m
Compensation costs Q1-Q3: 2008 – €3,250m; 2007 – €5,217m
Compensation ratio Q1-Q3: 2008 – 53%, 2007 – 36%
Headcount Q1-Q3: 2008 – 15,574; 2007 – 17,215
Average comp per head: 2008 – €209k
Layoffs over the past year: 1,668
Layoffs required to maintain compensation ratio: 5,130
UBS
Revenues Q1-Q3: 2008 – minus CHF21,418m; 2007 – CHF11,065m
Compensation costs Q1-Q3: 2008 – CHF4,589m; 2007 – CHF8,326m
Compensation ratio Q1-Q3: 2008 – unquantifiable; 2007 – 75.2%
Headcount Q1-Q3: 2008 – 18,901; 2007 – 22,666
Average comp per head: 2008 – CHF243k (US$208k)
Layoffs over the past year: 3,765**
Layoffs required to maintain compensation ratio: Everyone
JPMorgan (investment bank only)
Revenues Q1-Q3: 2008 – $12,516m; 2007 – $14,998m
Compensation costs Q1-Q3: 2008 – $6,535m; 2007 – $6,404m
Compensation ratio Q1-Q3: 2008 – 52%; 2007 – 43%
Headcount Q1-Q3: 2008 – 30,989; 2007 – 25,961
Average comp per head: 2008 – $211k
Layoffs over the past year: None; 5,298 staff added
Layoffs required to maintain compensation ratio: 5,647
Morgan Stanley
Revenues Q1-Q3: 2008 – $22,881m; 2007 – $28,476m
Compensation costs Q1-Q3: 2008 – $10,726m; 2007 – $13,365m
Compensation ratio Q1-Q3: 2008 – 46.9%; 2007 – 46.9%
Headcount Q1-Q3: 2008 – 46,383; 2007 – 47,713
Average comp per head: $231k
Layoffs over the past year: 1,330
Layoffs required to maintain compensation ratio: No additional layoffs required
Goldman Sachs
Revenues Q1-Q3: 2008 – $23,800m; 2007 – $35,246m
Compensation costs Q1-Q3: 2008 – $11,424m; 2007 – $16,918m
Compensation ratio Q1-Q3: 2008 – 48%; 2007 – 48%
Headcount Q1-Q3: 2008 – 32,569; 2007 – 29,905
Average comp per head: 2008 – $351k
Layoffs over the past year: None; 2,664 staff added***
Layoffs required to maintain compensation ratio: No additional layoffs required
• *Between Q1 and Q308 vs. Q1 and Q307, excluding 500 layoffs announced in October
• ** Between Q1 and Q308 vs. Q1 and Q307; excluding 1,901 layoffs announced in October
• ***Between Q1 and Q308 vs. Q1 and Q307, excluding 3,200 layoffs announced in October
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