By Elizabeth Dilts Marshall
NEW YORK (Reuters) – Big U.S. banks will spend more on salaries and benefits this year, as inflationary pressures, pandemic risks and the tight labor market force them to raise wages to get and keep workers.
The nation’s six biggest banks – JPMorgan Chase & Co, Bank of America, Citigroup, Wells Fargo & Co, Morgan Stanley and Goldman Sachs Group Inc – have taken steps to raise some workers’ wages in 2021 and several raised expense projections for the coming year.
“We are seeing certainly fierce competition in the war for talent, and that’s playing out in wage inflation,” Emily Portney, chief financial officer for Bank of New York Mellon Corp, told Reuters in an interview after reporting fourth-quarter earnings on Tuesday.
Portney said wages are rising even at the lower pay scales.
The cut-throat competition has forced investment banks and wealth managers like JPMorgan Chase, Bank of New York Mellon and Goldman Sachs to pay more to recruit and keep talent in some of its most lucrative jobs.
Goldman on Tuesday reported a 23% increase in fourth-quarter operating expenses, mainly due to higher compensation and benefits costs. In August, Goldman followed rival banks in raising pay for second-year analysts and first-year associates to $125,000 and $150,000.
“There is real wage inflation everywhere in the economy, everywhere,” said Goldman’s Chief Executive David Solomon.
The latest Labor Department employment report showed wages have increased solidly across the board.
At retail banks, the ongoing pandemic risks facing frontline branch workers and the high number of open jobs has pushed Bank of America and Wells Fargo to raise the minimum wage they offer to entry-level employees.
Bank of America, which reports its earnings on Wednesday, increased its minimum wage to $21 an hour in October as part of its pledge to have its minimum wage at $25 by 2025.
Wells Fargo raised its minimum wage for hourly workers to $18-$22, depending on location, late last year. The federal minimum wage in the U.S. is currently $7.25.
“The banking sector is not immune from the labor shortages and the trend of less people going into the industry due to the relative attractiveness of … other industries,” said Mark Doctoroff, co-head of MUFG’s Global Financial Institutions Group.
Wells’ Chief Financial Officer Mike Santomassimo said last week the bank expects a $500-million increase in wage and benefits-related costs in 2022 on top of the normal level of merit and pay increases, in part because of the increase in the minimum wage.
JPMorgan Chase, the largest U.S. bank, reported last week its non-interest expenses jumped 11% in the fourth quarter last year, largely due to higher staff compensation.
Citi also highlighted the competition for workers in last week’s earnings.
“Hiring has been very competitive across the business,” Citigroup Chief Financial Officer Mark Mason said.
(Reporting by Elizabeth Dilts Marshall; additional reporting by Michelle Price; editing by Megan Davies and Karishma Singh)
