What's Up: The Standard & Poor's 500 Financial Index is up 27 per cent this year, its largest annual increase since 2003, led by a 104 per cent gain in Bank of America.
Good year for Wall Street, but not for employees
The Standard & Poor's 500 Financial Index is up 27 per cent this year, its largest annual increase since 2003, led by a 104 per cent gain in Bank of America.
The index beat the broader S&P 500 Index for the first time since 2006.
But the strong year for Wall Street stocks moved in tandem with sackings of employees and reined-in salaries.
Shareholders and bondholders who saw compensation costs at the nine largest global investment banks outpace the gain in revenue from 2004 to 2008 are witnessing a shift: executives are more focused on investors than rainmakers.
The nine banks - Deutsche Bank, Barclays, JPMorgan Chase & Co, Bank of America, Citigroup, UBS, Credit Suisse Group, Goldman Sachs Group and Morgan Stanley - announced more than 30,000 job cuts in the first nine months of the year.
Total pay for traders and investment bankers is about half what it was in 2007, according to an October report from Options Group, a New York-based recruitment firm.
Goldman Sachs cut headcount and raised its dividend in the second quarter, the first time the New York-based bank has done both in the same period. It also named the smallest class of partners since going public in 1999.
Morgan Stanley probably will report lower compensation costs in 2012, even as its shares went up, something that hasn't happened in at least 15 years.
Citigroup, the third-biggest US bank by assets, climbed 4.8 per cent in the two days after its board ousted Vikram Pandit as chief executive. The stock jumped 6.3 percent when his replacement, Michael Corbat, said the bank would cut 11,000 jobs.
After Switzerland's UBS said it would jettison most of its fixed-income business and cut as many as 10,000 jobs, the bank's stock price climbed above book value for the first time in 15 months.
Even after gains this year, shares of the nine banks still trade at depressed levels as investors question their ability to boost profits. Total return to shareholders, which includes price gains as well as dividends, has been negative since the end of 2008 at Charlotte, North Carolina-based Bank of America, Citigroup and Credit Suisse. Only Barclays has beaten the S&P 500 Index in that period.
Shareholders expressed some sympathy for those who have lost jobs. The biggest US banks are cutting at least $30 billion of expenses and "I shudder to think how many people that is," said Kevin Conn, a financial-stock analyst at the money manager Massachusetts Financial Services Co.
* Bloomberg News