The great bonus wipeout of 2008 has begun. CNBC is reporting that JP Morgan Chase will be slashing bonuses by 30% to 50%. And JP Morgan is one of the healthier banks. Bonus season is going to be really ugly this year.
The Deal has some colour:
The news is not really surprising considering that the bank’s quarterly profits fell 84%, as J.P. Morgan’s balance sheet was ravaged by markdowns on underperforming home loans. Net income came in at only $527 million, a far cry from the $3.37 billion posted in the year-ago quarter.
Expenses also jumped due to massive layoffs following the Bear Stearns Cos. acquisition. Britain’s The Mail Online reported that J.P. Morgan raised compensation expenses from £2.7 billion ($4.7 billion) for the third quarter of 2007 to £3.4 billion, indicating that severance pay for laid-off employees explained the 20% rise in compensation expenses.
Additionally, layoffs could be on the way now that J.P Morgan has acquired Washington Mutual Inc. as well. On the bright side, former Washington Mutual chief executive Lou Pepper is spearheading efforts to raise money for employees that lose their jobs because of the sale. – Maria Woehr