Sharing banks’ spoils

With bank profitability unlikely to recover to pre-crisis levels, many investors now argue that cutting staff wages is the only reliable route to higher dividends.

This interactive graphic shows the results of an FT analysis of how the “spoils” to be divided between shareholders and employees at each of the world’s 13 big international banks have changed since 2000. With the pot of “spoils” defined as net profits with staff costs added back in, the chart shows the proportions allocated to dividends, pay and retained earnings.

On average, the share of the spoils distributed to staff has jumped from 58 per cent five years ago to nearly 81 per cent, while dividends have slumped to just 4.5 per cent, a third of their level before the financial crisis.

It is tempting to try to compare one bank with another – and on that basis HSBC is the clear winner in terms of dividend payouts. But the merit of peer comparison is limited. Though all the banks in the FT exercise are global banks, the balance of business is starkly different, with cheaper-to-run retail banking far more dominant at HSBC and expensive investment banking and wealth management dominating at the likes of Goldman Sachs and Morgan Stanley.

The historic comparisons are more valid, though crisis-period acquisitions - JPMorgan’s purchase of Washington Mutual and Bear Stearns, Bank of America’s purchase of Merrill Lynch and Barclays’ takeover of Lehman Brothers in the US - also skew those data by pushing up staff costs.