Bonus bonanza won’t heal BofA/Merrill divide
Bank of America’s crew on Wall Street can breathe a sigh of relief. It looks like the Charlotte-based bank is set to hand out 2007-like bonuses to all its investment bankers and traders. If so, that will prevent a repeat of last year’s mess when Merrill Lynch staff scored big in the firm’s last bonus round as an independent company – while their new BofA colleagues got squat. But leveling the bonus playing field is not a cultural cure-all.
There’s no guarantee this will remove the lingering resentment the two-tier pay muddle caused. But even if that’s no longer an issue, it requires more than better bonuses to heal the wounds inflicted when two former rivals are forced together. It took years before tensions settled down after Chase bought JPMorgan, for example. In the latter case, last year’s ousting of investment bank co-chief Bill Winters exposed raw merger nerves long considered soothed.
That’s not all. Bumper bonuses might be enough to keep some from actively seeking new employment. But that won’t stop rivals from aggressively knocking. Newly appointed BofA boss Brian Moynihan failed to inspire many of Merrill’s dealmakers during his short stint running the investment bank. And with ex-Merrill brass in senior positions elsewhere – including Greg Fleming at Morgan Stanley – BofA Merrill remains fertile poaching ground.
Washington could play a part, too. BofA could fork over $15 billion to bankers, traders and wealth managers for 2009, based on estimated revenue figures and Merrill’s 2006 ratio of compensation to revenue. There’s a good chance lawmakers and regulators will find that too much for a bank that has only just paid back the $45 billion of taxpayer aid that kept it standing – and which lost money in each of the first three quarters last year after stripping out one-off items.
Equalizing bonuses certainly makes sense. But BofA has a long way to go before the combination with Merrill fulfills expectations.