It's bonus week at Jefferies: "I am told it has been a great year"

It's that time again at Jefferies. Bonuses are being announced this week. Maybe tomorrow. 

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Despite Jefferies' travails involving First Brands, a bankrupt car parts supplier, and Point Bonita Capital, a fund run by a business that Jefferies merged with in 2022, its people are hopeful. "I am told it has been a great year, so let's see," says one managing director.

Jefferies' third quarter results didn't seem all that great. Revenues generated by its investment banking and capital markets activities in the first nine months were up 3%. Profits were down 5%. 

However, there are reasons to be cheerful. Compensation spending at Jefferies was up 4% in the first nine months. After adding hundreds of managing directors (MDs) between 2020 and 2024, Jefferies only added five new MDs net this year, meaning increased compensation might be directed to existing staff.

Rewarding new hires instead of incumbents has been a point of contention at Jefferies in previous years. Speaking at the bank's investor day in October, presidents Brian Friedman and Richard Handler acknowledged the need to pay their people. "The competition for talent is intense," declared Friedman. "We're going to continue to keep our guard up." Everyone one of Jefferies' 6,000 people "could get a job elsewhere," declared Handler. 

Jefferies has a reputation for paying formulaic bonuses, which are a percentage of individual revenues or PnL. It also has a history of paying cash bonuses and clawing them back, plus tax, if people leave. 

Times may be changing, though. The Financial Times reported in August that Jefferies people were being commanded to collaborate if they wanted to receive the highest bonuses (although mid-ranking insiders tell us they've heard nothing of this) and that the bank quietly began paying deferred stock bonuses to some MDs in 2024.

Usually, Jefferies' London MDs complain of being underpaid versus their US colleagues. Last year, though, the average bonus for Jefferies' 47 material risk-takers in London was $1m and three people in its London office earned over $4.7m in total. 

RBC announced its fourth quarter results last week and said its bonus pool is up 13%. 

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