Bank of America Corp is deferring payment of 2008 bonuses of $50,000 or more at its capital markets and investment banking units over three years, according to people familiar with the matter.
Employees who had expected a bonus this month based on their 2008 work will instead get most of it in three annual installments, starting in February 2010, said the people, who declined to be identified because the plan isn’t public.
A fraction of each bonus, perhaps less than 10 per cent of the amount due, will be paid in quarterly instalments this year, the people said. The Charlotte, North Carolina-based bank will pay interest on the remainder at the London interbank offered rate, or Libor, they said. The rate for three-month dollar loans yesterday was 1.18 per cent.
“This is historic,” said Jeanne Branthover, managing director in charge of global financial services for Boyden Global in New York, an executive search firm. “Employers can get away with anything right now because people are just happy to be employed.”
Bank of America doesn’t comment on compensation plans, spokesman Scott Silvestri said.
The bank is slashing up to 35,000 jobs to achieve $7 billion in annual cost savings after its purchase this month of Merrill Lynch & Co, the world’s largest brokerage.
Bank of America won’t disclose how many of the cuts are occurring in its investment banking units.
Merrill Lynch paid about $3.6 billion in bonuses, days before its sale to Bank of America was completed on January 1, Fortune magazine reported on its Web site.
New York Attorney General Andrew Cuomo is studying whether the payments violated securities laws, a person familiar with the matter said.
Cuomo also wants to know what Bank of America Chief Executive Officer Kenneth Lewis knew about the bonuses and Merrill’s $15 billion net loss in the fourth quarter, the person said. Lewis, 61, fired Merrill’s CEO John Thain on January 23.
Lewis has said he won’t receive a bonus this year after the bank reported a $1.8 billion loss in the fourth quarter, its first deficit since 1991. For the year, the bank earned $4 billion while its stock price declined by two-thirds.
The US Treasury agreed in January to provide $20 billion in additional capital and $118 billion in asset guarantees to Bank of America to help absorb losses at Merrill Lynch.
President Barack Obama and Democrats in Congress are moving to cap Wall Street bonuses and pay. White House spokesman Robert Gibbs said it’s “very safe” to assume that new rules guiding the administration’s financial rescue will address bonuses and executive pay.
MetLife Inc, the biggest US life insurer, said it was introducing a new pay-for-performance plan tied to profit over three years and how it compares with industry peers.
Financial companies in New York City paid cash bonuses of $18.4 billion last year, the sixth-most in history, even as they posted record losses, according to data compiled by the office of state Comptroller Thomas DiNapoli.
The Financial Times reported on the bonus deferrals earlier, citing unidentified executives familiar with the matter.
