Citigroup Inc. (C) may cap cash bonuses for 2009 at below $100,000. The 2009 bonus pool at the company is expected to be similar to the 2008 level, which was low compared to the other years. Citi may pay a large part of the bankers’ and traders’ bonuses in stock that cannot be sold for a number of years.
Citi may pay up to 40% of bonuses in the form of deferred cash and stock and the balance in the form of non-deferred cash and IOUs, which will turn to common stock in April.
Currently, Citi is working out the details of its bonus plan. Recently, New York Attorney General Andrew Cuomo asked Citi and 7 other of the largest banks in the nation that received significant federal aid under the Troubled Asset Relief Program (TARP) to provide information on the amount of 2009 bonus packages and their structure. Cuomo also asked the banks to explain the effect the bonus pools would have had if the banks had not received the TARP funds.
The 7 other TARP banks that have received Cuomo’s letter asking for bonus information are Bank of America Corp. (BAC), Bank of New York Mellon Corp. (BK), Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM), Morgan Stanley (MS), State Street Corp. (STT) and Wells Fargo & Co. (WFC). Cuomo has asked the TARP banks to provide the bonus information by February 8.
According to Cuomo, the full disclosure and transparency of the bonus information are essential as recent government actions have given rise to public accountability issues, and TARP banks are struggling with these actions.
Citi received $45 billion in bailout money from the TARP at the height of the credit crisis. Later, around $25 billion of that was converted into common stock, representing nearly 34% of its stake held by taxpayers. The company repaid the remaining $20 billion in bailout money in December 2009, freeing the obligatory pay restrictions on its key executives.
We believe Citi’s plan to cap cash bonuses is to save the bank from people’s fury over the TARP banks’ 2009 bonus plans. However, the bank may still find it difficult to keep its top employees.
Read the full analyst report on “C”
Read the full analyst report on “BAC”
Read the full analyst report on “BK”
Read the full analyst report on “GS”
Read the full analyst report on “JPM”
Read the full analyst report on “MS”
Read the full analyst report on “STT”
Read the full analyst report on “WFC”
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