February 7, 2025 • 11 mins
It’s bonus season on Wall Street. But if you work for a bank, you know that the number you’re quoted is almost never the number you get when it comes time for that bonus to pay out.
On today’s Big Take podcast, global finance reporter Laura Noonan shares what she learned by crunching the numbers on which banks deliver more or less than they promised.
Read more: How Much Your Wall Street Bonus Is Really Worth
See omnystudio.com/listener for privacy information.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. It's bonus season on
Wall Street, and it's expected to be a good year.
Executives at Morgan Stanley, Bank of America and JP Morgan
are reportedly planning to give out some of the biggest
bonus increases since the pandemic. But these bonuses aren't typically
(00:23):
paid fully in cash.
Speaker 2 (00:25):
You're usually given a dollar figure, but what you're actually
given is shares which fall and rise in life.
Speaker 1 (00:33):
Laura Noonan covers global finance for Bloomberg.
Speaker 2 (00:36):
So if you're getting twenty thousand shares and the share
price is two dollars today, they will call that a
forty thousand dollars bonus.
Speaker 1 (00:45):
But you don't get all forty thousand dollars worth of
stock today. Bonuses usually pay out over several years, and
by the time you're forty thousand dollars worth of stock
fully vests, it might not be worth forty thousand dollars anymore.
So Laura and her colleagues developed a bonus calculator. They
looked at data from a dozen of the world's biggest
(01:08):
banks and dug into how much these bonuses were really
worth once they were paid out.
Speaker 2 (01:14):
If you were, say, weighing an offer from two banks
back in twenty fifteen, and you want to see how
your bonus would have fared if you picked the other bank.
You can just check. So we did it. Assuming you're
getting a one hundred thousand dollar bonus.
Speaker 1 (01:26):
What they found is a one hundred thousand dollars bonus
does not always mean the same thing. It can vary
widely depending on what bank you work for, what year
you get your shares, and what year you cash them out.
Speaker 2 (01:39):
One of the cases we looked at was in twenty eighteen,
adoutsche Bank trader awarded a one hundred thousand dollars If they
cashed out everything in each year as they could have,
that would have gone down to forty six thousand, six
hundred twenty eight, so they lost half, whereas a JP
Morgan person given the same amount would have got about
one hundred and thirteen thousand.
Speaker 1 (02:02):
This is the big take from Bloomberg News. I'm Sarah Holder.
Today on the show how Much is a Big Bank
Bonus Actually Works? Laura Noonan shares what she found about
the true value of bonuses promised by some of the
world's biggest banks. Let's imagine you've just been offered a
(02:24):
job on Wall Street. Congratulations. Chances are you're being offered
a hefty salary plus an even heftier bonus.
Speaker 2 (02:32):
The bonus can be a very big proportion, so you
could be talking three or four times your salary in
your bonus. Depending on how well you do. As you
get more senior, the bonus can get even bigger relative
to your actual salary. It wouldn't be unusual to earn
most of your money within bonuses.
Speaker 1 (02:48):
That bonus offer. It's not set in stone. You might
actually take home more money or less depending on how
well your company's stock performs. Laura told me that's actually
the point, and it didn't always work like this.
Speaker 2 (03:04):
Before the financial crisis, a lot of that bonus was
paid in actual cash, so on the bonus day you
get your check, it just got into your pacelip. Since
the crisis, there was a lot of talk about the
fact that people made very big bonuses on things that
then went disastrously wrong years later and actually lost a
lot of money, But the bankers had already walked away
with their millions of bonuses. So in an effort to
(03:26):
better align how bankers are paid with how things ultimately
play out. What they did was instead of getting all
your bonus in cash, you would get a big potential
of it in shares or in other things which are deferred.
Speaker 1 (03:39):
So you might be promised a certain number of shares,
but you can't sell those shares at once they vest
over a year or two or three.
Speaker 2 (03:48):
The other thing that the deferrals did was it makes
you stay well. In theory, it makes you stay in
the bank because you only get paid if you stick around.
Speaker 1 (03:57):
So then let's fast forward three to four years I've
been and during my time at the big bank, how
do I figure out how much money I'm actually going
to get paid?
Speaker 2 (04:06):
So the total amount, we're going to assume that you
sell everything as soon as you can. So maybe when
you got the stock it was worth ten dollars. When
you sold the first batch, it was worth twelve, the
second batch it was worth nine, the final batch it
was worth eight. Basically, all of those together will tell
you the average share price that you sold at, and
(04:26):
you can add up all the money and see how
much you got.
Speaker 1 (04:29):
Laura looked at the average value of a one hundred
thousand dollars bonus across a dozen different banks between twenty
and eight and twenty twenty three. She found that if
you worked at Morgan Stanley or JP Morgan during that
time span, your annual one hundred thousand dollars bonus might
wind up making you one hundred and twenty five thousand
dollars on average, but at Deutsche Bank you'd walk away
(04:52):
with closer to ninety thousand. Laura says if you follow
banking news, it won't surprise you to know that bonuses
at Deutsche Bank had one of the lowest average values.
The bank had a streak of bad years during that period,
depressing their stock.
Speaker 2 (05:06):
But if you look at individual years, I don't think
anybody would have thought that the most valuable bonus ever
granted was by Bank of America in twenty twelve. That
to me was surprising. It's just a confluence of how
share price just did over the period. So in that
case Bank of America's twenty twelve award, for every one
hundred thousand, you would have got just over two hundred
(05:26):
and seventy thousand dollars by the time you actually catch
them out, which is huge. I mean, it's a big,
big differential, and the reason for that is Bank of
America's share price was quite depressed when they granted the award,
and then subsequently rose for several years.
Speaker 1 (05:39):
Trying to use these kinds of past insights to maximize
your future bonus can be a challenge, but there are
some general trends Laura found looking at the data with hindsight.
Speaker 2 (05:50):
You know, you don't want to work for a European
bank generally unless it's UBS. American banks were generally much
more stable. They didn't have the same kind of highs
and loads. European bank just went through and mild swings.
I would take UBS out of that because UBS has
more of the characteristics of a US bank, and also
it's outside the EU, it's a big wealth manager. It's
the only one that actually was not bottom half in
(06:12):
terms of average bonus currency. But the other European banks
they're just structurally less profitable banks. They're in smaller markets.
Speaker 1 (06:20):
But over the last few years, those differences between banks
have gotten less significant. Since twenty nineteen, the gap between
bonus values at the best performing banks and the worst
has narrowed. And there's a big asterisk here. The analysis
doesn't account for another variable that can change how much
of a bonus you actually get to take home taxes.
Speaker 2 (06:43):
So this is basically purely looking at how much those
shares are worth, not how much the shares are worth
to you.
Speaker 1 (06:53):
But what can all this teach people in the banking
world about what these bonuses might end up worth to
them and how much they can bank on their bonus payouts.
That's coming up. Bloomberg's Laura Nonan told me the idea
(07:14):
behind a bonus was to be just that, a bonus
gravy on top of your salary. But bonuses have become
such a large proportion of Wall Street bankers compensation packages
that many people plan major life decisions based on the
figures they're promised.
Speaker 2 (07:31):
Originally, I mean, bonuses were meant to be exceptional for
the very high performers. It was a way to incentivize
them because they feel like, I'm making my bank all
this money. I want to be paid something special on
top of my salary. Now, bonuses did become almost an
entitlement for banks, Like or people expected them every year,
and they expected a minimum level of bonus every year.
Speaker 1 (07:51):
It's like being at a concert. The audience is conditioned
to expect an encore, so everyone stays waiting for their
favorite song to play, even after the band has left
the stage. But what if the audience makes it to
the end, claps their hearts out, but the band just
doesn't come back to play the hit. That's kind of
like a Wall Street bonus in a bad year.
Speaker 2 (08:13):
And that has been problematic, Like some people rely on
bonuses to pay their school fees because they've become so
recurring that people don't treat them as this exceptional nice
to have. They just build it into their day to
day living expenditure.
Speaker 1 (08:25):
But as you said, they're not that stable.
Speaker 2 (08:27):
Necessarily, they're not that stable, and they are head up
in chairs. And the other thing about it is like
credit we speneut. If you have most of your wealth
in shares of the bank you work in and the
bank collapses, you lose both your job and your savings
at the same time. I mean, people have a very
big one way risk on these banks. And that's partly
why we did it based on the if you sell
(08:49):
as soon as you can, because it doesn't make sense
to have everything bet on the same company, And a
lot of people are actually quite lazy and they just
let them roll over, which is fine until goes badly wrong.
Speaker 1 (09:01):
For employers looking to retain talent, Bonuses aren't always such
a reliable strategy either. Sure, people waiting for their payout
might stick around longer than they would have otherwise, but
Laura says it's common to negotiate with a new employer
to compensate you if you leave a bank before your
bonus fully vests. What advice would you give someone looking
(09:21):
to maximize their bonus earnings based on what you've seen
in this calculator? Is that something you can game out.
Speaker 2 (09:28):
If you have a high risk appetite and you're looking
to maximize, then you probably want to go for something
with a pretty low share price if you believe it
will appreciate. You know, I'd be thinking more a City
or a Wells Fargo than a Jping Morgan. If you
want to have a high bonus value over time, something
that's going to almost always pay you more than you expect,
(09:48):
then you want Jping Morgan. You want a Morgan Stanley
because those banks have almost always you've ended up getting
more than you were promised on the day. So it
depends on your time horizon and on your risk appetite.
Speaker 1 (10:00):
Of course, if you don't work in banking. You might
be listening to this and thinking I'd be happy with
any of these bonus amounts. But there are some takeaways
here for anyone to consider. Be careful what you expect
when a company makes you promises in stock. Think about
selling your shares right when they vest, so your employment
and financial eggs aren't all in one basket. And while
(10:23):
some companies are more stable than others, it's not always
a bad idea to work for a company that has
some room to grow. If you take a chance on
the underdog, you might just wind up with a big
bonus upside. This is The Big Take from Bloomberg News.
(10:44):
I'm Sarah Holder. This episode was produced by Julia Press.
It was edited by Tracy Samuelson and Jenny Seraine. It
was mixed and sound designed by Alex Suguiera. It was
fact checked by Adriana Tapia. Our senior producer is Naomi Shaven.
Our senior editor is Elizabeth Ponso. Our executive producer is
Nicole beamsterboard Sage Bauman is Bloomberg's head of Podcasts. If
(11:07):
you like this episode, make sure to subscribe and review
The Big Take wherever you listen to podcasts. It helps
people find the show. Thanks so much for listening. We'll
be back next week.
Bloomberg Audio Studios, podcasts, radio news. It's bonus season on
Wall Street, and it's expected to be a good year.
Executives at Morgan Stanley, Bank of America and JP Morgan
are reportedly planning to give out some of the biggest
bonus increases since the pandemic. But these bonuses aren't typically
(00:23):
paid fully in cash.
Speaker 2 (00:25):
You're usually given a dollar figure, but what you're actually
given is shares which fall and rise in life.
Speaker 1 (00:33):
Laura Noonan covers global finance for Bloomberg.
Speaker 2 (00:36):
So if you're getting twenty thousand shares and the share
price is two dollars today, they will call that a
forty thousand dollars bonus.
Speaker 1 (00:45):
But you don't get all forty thousand dollars worth of
stock today. Bonuses usually pay out over several years, and
by the time you're forty thousand dollars worth of stock
fully vests, it might not be worth forty thousand dollars anymore.
So Laura and her colleagues developed a bonus calculator. They
looked at data from a dozen of the world's biggest
(01:08):
banks and dug into how much these bonuses were really
worth once they were paid out.
Speaker 2 (01:14):
If you were, say, weighing an offer from two banks
back in twenty fifteen, and you want to see how
your bonus would have fared if you picked the other bank.
You can just check. So we did it. Assuming you're
getting a one hundred thousand dollar bonus.
Speaker 1 (01:26):
What they found is a one hundred thousand dollars bonus
does not always mean the same thing. It can vary
widely depending on what bank you work for, what year
you get your shares, and what year you cash them out.
Speaker 2 (01:39):
One of the cases we looked at was in twenty eighteen,
adoutsche Bank trader awarded a one hundred thousand dollars If they
cashed out everything in each year as they could have,
that would have gone down to forty six thousand, six
hundred twenty eight, so they lost half, whereas a JP
Morgan person given the same amount would have got about
one hundred and thirteen thousand.
Speaker 1 (02:02):
This is the big take from Bloomberg News. I'm Sarah Holder.
Today on the show how Much is a Big Bank
Bonus Actually Works? Laura Noonan shares what she found about
the true value of bonuses promised by some of the
world's biggest banks. Let's imagine you've just been offered a
(02:24):
job on Wall Street. Congratulations. Chances are you're being offered
a hefty salary plus an even heftier bonus.
Speaker 2 (02:32):
The bonus can be a very big proportion, so you
could be talking three or four times your salary in
your bonus. Depending on how well you do. As you
get more senior, the bonus can get even bigger relative
to your actual salary. It wouldn't be unusual to earn
most of your money within bonuses.
Speaker 1 (02:48):
That bonus offer. It's not set in stone. You might
actually take home more money or less depending on how
well your company's stock performs. Laura told me that's actually
the point, and it didn't always work like this.
Speaker 2 (03:04):
Before the financial crisis, a lot of that bonus was
paid in actual cash, so on the bonus day you
get your check, it just got into your pacelip. Since
the crisis, there was a lot of talk about the
fact that people made very big bonuses on things that
then went disastrously wrong years later and actually lost a
lot of money, But the bankers had already walked away
with their millions of bonuses. So in an effort to
(03:26):
better align how bankers are paid with how things ultimately
play out. What they did was instead of getting all
your bonus in cash, you would get a big potential
of it in shares or in other things which are deferred.
Speaker 1 (03:39):
So you might be promised a certain number of shares,
but you can't sell those shares at once they vest
over a year or two or three.
Speaker 2 (03:48):
The other thing that the deferrals did was it makes
you stay well. In theory, it makes you stay in
the bank because you only get paid if you stick around.
Speaker 1 (03:57):
So then let's fast forward three to four years I've
been and during my time at the big bank, how
do I figure out how much money I'm actually going
to get paid?
Speaker 2 (04:06):
So the total amount, we're going to assume that you
sell everything as soon as you can. So maybe when
you got the stock it was worth ten dollars. When
you sold the first batch, it was worth twelve, the
second batch it was worth nine, the final batch it
was worth eight. Basically, all of those together will tell
you the average share price that you sold at, and
(04:26):
you can add up all the money and see how
much you got.
Speaker 1 (04:29):
Laura looked at the average value of a one hundred
thousand dollars bonus across a dozen different banks between twenty
and eight and twenty twenty three. She found that if
you worked at Morgan Stanley or JP Morgan during that
time span, your annual one hundred thousand dollars bonus might
wind up making you one hundred and twenty five thousand
dollars on average, but at Deutsche Bank you'd walk away
(04:52):
with closer to ninety thousand. Laura says if you follow
banking news, it won't surprise you to know that bonuses
at Deutsche Bank had one of the lowest average values.
The bank had a streak of bad years during that period,
depressing their stock.
Speaker 2 (05:06):
But if you look at individual years, I don't think
anybody would have thought that the most valuable bonus ever
granted was by Bank of America in twenty twelve. That
to me was surprising. It's just a confluence of how
share price just did over the period. So in that
case Bank of America's twenty twelve award, for every one
hundred thousand, you would have got just over two hundred
(05:26):
and seventy thousand dollars by the time you actually catch
them out, which is huge. I mean, it's a big,
big differential, and the reason for that is Bank of
America's share price was quite depressed when they granted the award,
and then subsequently rose for several years.
Speaker 1 (05:39):
Trying to use these kinds of past insights to maximize
your future bonus can be a challenge, but there are
some general trends Laura found looking at the data with hindsight.
Speaker 2 (05:50):
You know, you don't want to work for a European
bank generally unless it's UBS. American banks were generally much
more stable. They didn't have the same kind of highs
and loads. European bank just went through and mild swings.
I would take UBS out of that because UBS has
more of the characteristics of a US bank, and also
it's outside the EU, it's a big wealth manager. It's
the only one that actually was not bottom half in
(06:12):
terms of average bonus currency. But the other European banks
they're just structurally less profitable banks. They're in smaller markets.
Speaker 1 (06:20):
But over the last few years, those differences between banks
have gotten less significant. Since twenty nineteen, the gap between
bonus values at the best performing banks and the worst
has narrowed. And there's a big asterisk here. The analysis
doesn't account for another variable that can change how much
of a bonus you actually get to take home taxes.
Speaker 2 (06:43):
So this is basically purely looking at how much those
shares are worth, not how much the shares are worth
to you.
Speaker 1 (06:53):
But what can all this teach people in the banking
world about what these bonuses might end up worth to
them and how much they can bank on their bonus payouts.
That's coming up. Bloomberg's Laura Nonan told me the idea
(07:14):
behind a bonus was to be just that, a bonus
gravy on top of your salary. But bonuses have become
such a large proportion of Wall Street bankers compensation packages
that many people plan major life decisions based on the
figures they're promised.
Speaker 2 (07:31):
Originally, I mean, bonuses were meant to be exceptional for
the very high performers. It was a way to incentivize
them because they feel like, I'm making my bank all
this money. I want to be paid something special on
top of my salary. Now, bonuses did become almost an
entitlement for banks, Like or people expected them every year,
and they expected a minimum level of bonus every year.
Speaker 1 (07:51):
It's like being at a concert. The audience is conditioned
to expect an encore, so everyone stays waiting for their
favorite song to play, even after the band has left
the stage. But what if the audience makes it to
the end, claps their hearts out, but the band just
doesn't come back to play the hit. That's kind of
like a Wall Street bonus in a bad year.
Speaker 2 (08:13):
And that has been problematic, Like some people rely on
bonuses to pay their school fees because they've become so
recurring that people don't treat them as this exceptional nice
to have. They just build it into their day to
day living expenditure.
Speaker 1 (08:25):
But as you said, they're not that stable.
Speaker 2 (08:27):
Necessarily, they're not that stable, and they are head up
in chairs. And the other thing about it is like
credit we speneut. If you have most of your wealth
in shares of the bank you work in and the
bank collapses, you lose both your job and your savings
at the same time. I mean, people have a very
big one way risk on these banks. And that's partly
why we did it based on the if you sell
(08:49):
as soon as you can, because it doesn't make sense
to have everything bet on the same company, And a
lot of people are actually quite lazy and they just
let them roll over, which is fine until goes badly wrong.
Speaker 1 (09:01):
For employers looking to retain talent, Bonuses aren't always such
a reliable strategy either. Sure, people waiting for their payout
might stick around longer than they would have otherwise, but
Laura says it's common to negotiate with a new employer
to compensate you if you leave a bank before your
bonus fully vests. What advice would you give someone looking
(09:21):
to maximize their bonus earnings based on what you've seen
in this calculator? Is that something you can game out.
Speaker 2 (09:28):
If you have a high risk appetite and you're looking
to maximize, then you probably want to go for something
with a pretty low share price if you believe it
will appreciate. You know, I'd be thinking more a City
or a Wells Fargo than a Jping Morgan. If you
want to have a high bonus value over time, something
that's going to almost always pay you more than you expect,
(09:48):
then you want Jping Morgan. You want a Morgan Stanley
because those banks have almost always you've ended up getting
more than you were promised on the day. So it
depends on your time horizon and on your risk appetite.
Speaker 1 (10:00):
Of course, if you don't work in banking. You might
be listening to this and thinking I'd be happy with
any of these bonus amounts. But there are some takeaways
here for anyone to consider. Be careful what you expect
when a company makes you promises in stock. Think about
selling your shares right when they vest, so your employment
and financial eggs aren't all in one basket. And while
(10:23):
some companies are more stable than others, it's not always
a bad idea to work for a company that has
some room to grow. If you take a chance on
the underdog, you might just wind up with a big
bonus upside. This is The Big Take from Bloomberg News.
(10:44):
I'm Sarah Holder. This episode was produced by Julia Press.
It was edited by Tracy Samuelson and Jenny Seraine. It
was mixed and sound designed by Alex Suguiera. It was
fact checked by Adriana Tapia. Our senior producer is Naomi Shaven.
Our senior editor is Elizabeth Ponso. Our executive producer is
Nicole beamsterboard Sage Bauman is Bloomberg's head of Podcasts. If
(11:07):
you like this episode, make sure to subscribe and review
The Big Take wherever you listen to podcasts. It helps
people find the show. Thanks so much for listening. We'll
be back next week.
Hosts And Creators
Sarah Holder
Saleha Mohsin
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