What to make of Bank of America's $4 billion in bonuses?

February 4, 2010 | By Jim Kim

Like other banks, Bank of America (BAC) faced some tricky PR challenges when letting it be known that it will pay $4 billion in bonuses for work done in 2009. But it has several facts working in its favor, which ought to mute the potential PR fallout. It's bonuses account for only 19 percent of revenue, which is a lot lower than that other banks.

At Goldman Sachs (GS) for example, compensation accounted for 36 percent of Goldman's $45.17 billion in 2009 revenue, the lowest annual ratio ever for the company. At JPMorgan, the bank set aside 33 percent of its investment banking revenues for compensation. That's almost half the 2008 figure and below its 44 percent historical average. At Morgan Stanley (MS), the compensation to revenue ratio was a whopping 62 percent. It also helped Bank of America that nearly all of the bonuses paid by Bank of America will be in stock and will not vest immediately.

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