Graeme Wearden – Guardian January 14, 2011
Anti-poverty campaigners renewed their call for new taxes on the financial sector after JP Morgan Chase set aside almost $10bn to cover basic pay and bonuses for its investment banking division.
The Robin Hood Tax campaign said it was “outrageous” that JP Morgan Chase’s investment bankers are to receive an average payout of $369,651 (£233,000) for 2010. The group, which supports a global tax on banks’ financial transactions, said the size of the payments were “a slap in the face to ordinary people”.
“If banks can afford to pay billions in bonuses, they can clearly afford to be taxed a great deal more. A £20bn Robin Hood tax in the UK would help avoid the worst of the cuts and show we are all in this together,” said David Hillman, spokesman for the Robin Hood Tax campaign.
“While bankers wallow in cash, the general public are suffering unemployment and cuts to public services,” Hillman added.
The figures were released after JP Morgan Chase kicked off the US banking reporting season by reporting a 47% jump in profits for the last quarter of 2010. America’s second largest bank beat Wall Street forecasts, thanks to an improved performance from its retail banking and credit card operations.
JP Morgan said it had allocated $9.73bn (£6.2bn) as “compensation” for its investment bankers, up from $9.33bn in 2009. The average total pay packet fell slightly, though, to $369,651 from $379,986, as the number of employees rose to just over 26,300.
Staff members will not be told their individual bonuses for several weeks.
JP Morgan increased the percentage of turnover set aside for salary and bonuses to 37%, from 33% last year. This meant that the total pay and bonus pot increased despite JP Morgan’s investment bank making less profit, on lower revenue, than in 2009. For 2010 as a whole, the investment banking arm saw a 4% drop in profits to $6.64bn, with turnover 7% lower at $26.2bn.
2010’s compensation ratio drops to 35% if the $550m tax paid last July for Alistair Darling’s one-off bonus tax is excluded.
Overall, the company made net earnings of $4.8bn for the final three months of last year, up 47%. For 2010 as a whole JP Morgan posted a net income of $17.4bn on revenues of $104.8bn, close to 50% higher than a year ago.
JP Morgan’s retail financial service division and its credit card arm both returned to profit in the last quarter, having made losses a year ago. The company made substantially lower provisions for bad loans than a year ago, and also released some funds which it had previously set aside to cover losses from the credit crisis.
Chairman and chief executive Jamie Dimon said that the company had enjoyed a “solid” year, but admitted that the ongoing crisis in the US housing market was causing problems.
“Credit trends in our credit card and wholesale businesses continued to improve. In our mortgage business, while charge-offs and delinquencies have improved, credit costs still remain at abnormally high levels and continue to be a significant drag on our returns,” said Dimon.
“Although we continue to face challenges, there are signs of stability and growth returning to both the global capital markets and the US economy,” he added.