BofA plan to defer bonuses set to inflame tensions with Merrill
By Greg Farrell in New York
Published: January 29 2009 02:00 | Last updated: January 29 2009 02:00

Bank of America is planning to defer bonus payments to some investment banking staff this year - a move certain to inflame tensions between its employees and officials of newly acquired Merrill Lynch, say executives familiar with the matter.

Andrew Cuomo, New York attorney-general, is investigating Merrill's decision to accelerate the payment of nearly $4bn (£2.8bn) in bonuses - mostly in cash - to its employees just days before the closing of its sale to BofA on January 1.

As that probe proceeds, BofA was expected to tell staff at its capital markets and investment banking units today that it would be deferring payment of 2008 bonuses of $50,000 or more, according to executives familiar with the decision. BofA employees, who would normally receive their 2008 bonuses in February, will have to wait until February 2010 before getting one-third of their 2008 sum, the executives said. The remaining thirds will be paid out in 2011 and then 2012.

BofA said in a statement: "We traditionally don't comment on our compensation plans, particularly in advance of sharing details with our associates. Your story is not entirely accurate."

Word of the deferred payments has sparked anger at BofA's capital markets operations in New York and London, which were already facing the prospect of job cuts of up to 40 per cent as they are combined with similar units at Merrill.

BofA staffers are unhappy with the disparity between their bonuses and those earned by staffers at Merrill Lynch.

BofA employees, on average, earn far less than their Merrill counterparts.

BofA insiders said that the deferral of payments would be a particular problem for executives who have constructed a lifestyle around the near-certainty that there would be some kind of bonus each February.

They said that this could lead to departures beyond the 3,000 or so job cuts expected in the unit this quarter.

"This is going to cause an uproar," says one BofA executive familiar with the matter. "There will be cash-flow issues for families." Most BofA bonuses are paid in cash. Certain "key" employees are paid bonuses in a mixture of cash and stock.

Morale is already low among legacy BofA capital markets and investment banking staffers, who expect bonuses to be far lower than 2007 levels.

Across Wall Street, bonuses are down 44 per cent from the previous year, according to a study released yesterday by the New York state comptroller's office.
 

Copyright The Financial Times Limited 2009