Bank of America Jolts Traders With Flat Bonus Pool in Omen for Wall Street

(Bloomberg) -- Bank of America Corp.’s leaders are planning year-end bonuses that break with Wall Street traders’ hopes for hefty raises after a record-setting run.

Senior executives are floating plans to keep the bonus pool for sales and trading at last year’s level, despite a 20% jump in revenue during the first nine months of this year, according to people briefed on the talks who spoke on the condition of anonymity. The process is still in an early stage and will go through rounds of negotiation and approvals.

The bank’s leadership is weighing rewards against the strains of a pandemic that’s dragged on the consumer division and added expenses. But the restraint already is triggering outrage among staff who expected to be paid handsomely for a banner year. Executives still have time to lobby for larger payouts to top-performing desks, and may indeed wrangle more money, some of the people said. But even then, increases will probably be modest.

A company spokesman declined to comment.

The tensions inside Bank of America offer a window into conversations likely to unfold in coming weeks across Wall Street, where major banks pay close attention to rivals’ compensation decisions when setting their own payouts. Legions of traders have been hoping to share the spoils from 2020’s wild markets, in which the pandemic and U.S. politics repeatedly set off gushers of client orders.

But industry leaders are contending with broader problems, including losses on loans, the possibility that the trading windfall won’t last and the optics of handing out wads of cash to well-paid staff in a time of economic misery.

Tempering Expectations

Among Wall Street’s chief executive officers, Bank of America’s Brian Moynihan is especially familiar with shifting political winds after rebuilding the company’s battered businesses and reputation in the aftermath of the 2008 crisis. In recent years, he’s publicly embraced stronger environmental, social and governance standards. Now, he’s steering the firm into the ascendancy of a Democratic administration under President-elect Joe Biden.

The investment bank’s final bonus decisions will be shaped by how the fourth quarter pans out, the people said. But already, the initial talks are prompting senior managers to temper expectations as they approach year-end meetings with subordinates.

In an unusual Sunday briefing, a manager in the fixed-income division informed members of his group that they should prepare for bonuses that are, at best, flat.

Until now, the tone on Wall Street had been more optimistic, with some compensation consultants predicting generous raises. Earlier this month, a closely watched survey by Johnson Associates Inc. estimated equity traders could see bonuses jump by about 25%, while bond traders would watch theirs soar 45% or more.

Rivals Watching

The deliberations at Bank of America, one of the industry’s largest employers, will make it easier for rivals to stop far short of such dramatic increases, even if they do grant raises.

While Bank of America’s stock-trading operations had a record first quarter, they’ve also experienced bumps this year. In a second-quarter regulatory filing, the bank flagged “weaker trading performance” in the unit’s derivatives business, where people familiar with the matter said it lost more than $100 million on some positions outside the U.S.

The division has also seen personnel shake-ups, culminating with the October announcement that longtime stocks chief Fab Gallo would step down and depart.

Revenue from the bank’s fixed-income trading division rose almost 22% in the first nine months of the year. The former co-head of that business, Jim DeMare, was promoted in July to lead global sales and trading.

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