JPMorgan dampens staff salary and bonus expectations

JPMorgan Chase & Co, the biggest and most-profitable US bank, is dampening employees' salary and bonus expectations as the lender wraps up year-end performance reviews, said three executives familiar with the process.

Managers are telling workers at the New York-based firm that total average compensation may be lower to unchanged from last year and that year-end bonuses mostly will depend on the company's profit (JPM) and the performance of their divisions.

JPMorgan, which posted a record US$17.4 billion ($22.3 billion) in net income last year, may earn $19.1 billion in 2011 even as revenue and profit margins shrink, according to projections by 12 analysts in a Bloomberg survey.

Average 2011 compensation for the bank's 256,000 employees will drop or stagnate as the company resists an industry trend of mass layoffs, the people said.

Financial companies have cut more than 200,000 jobs worldwide this year.

"Firms are going to have to base bonuses much more on merit than strategy," Paul Sorbera, president of Wall Street executive search firm Alliance Consulting, said yesterday in a phone interview.

"There are groups and departments that will do well, and groups and departments not doing well, that's where you see challenges to the bonus pool."

Employees in JPMorgan's investment bank are bracing for a smaller-than-usual share of the bonus pool, even as net income for the division during the first nine months of the year climbed 18 per cent to $6.1 billion from a year earlier, said one of the people, who spoke on condition of anonymity because the company's compensation practices aren't public.

The board of directors, who are led by chairman and chief executive officer Jamie Dimon, opted to exclude certain paper gains from its performance equations, such as a so-called debt-valuation adjustment that added $1.9 billion of pretax profit to the investment bank's third-quarter results, two of the people said.

The unit, which had 26,615 employees at the end of September, set aside $7.71 billion for compensation in the first three quarters, a 2 per cent drop from a year earlier.

The expense, which includes salaries, bonuses and benefits, was enough to give each of the division's employees $289,611 for the first nine months of this year, this is compared with average compensation of $298,866 for the same period last year.

While the bank isn't planning layoffs, "we always trim our sails", Dimon said during an October 13 conference call.

The unit reduced its workforce 4 per cent in the third quarter from the previous three-month period.

JPMorgan will be "squeezing a little bit here and squeezing a little bit there" to further trim staff at the investment bank by about 1000 people, or "maybe a little bit more", during the next 18 months, Dimon said.

- Bloomberg