SA’s bank execs still raking it in

2015-04-12 16:00

Nedbank CEO is highest-paid banking executive, but the other big three banks have also coughed up millions to reward their chiefs

The total remuneration package paid to Nedbank boss Mike Brown – disclosed in the bank’s annual report published last week – is the largest paid to an executive of South Africa’s big four banks and shows how lucky local financial services bosses are to escape a global clampdown on banker bonuses.

Brown was paid more than R35?million last year, with bonuses and incentives making up the bulk of this amount.

This made him the best-paid executive of the big four banks that have released their annual reports for last year (see graphic).

Standard Bank will release its annual report later this month.

Following the global financial crisis, there has been controversy surrounding bonuses paid to financial executives – especially in the US and European Union (EU).

Six years ago, US President Barack Obama ordered former US Treasury secretary Timothy Geithner to block bonuses meant to be paid to insurer American International Group, a recipient of $85?billion (R1?trillion) in state bailout funds.

More recently, the European Parliament passed the “EU banker bonus cap”, a measure restricting the bonuses of top executives to not more than their fixed remuneration.

If approval is obtained from shareholders through a supermajority vote, executives can be paid double their fixed remuneration. This measure came into effect in January last year.

Last year, Nedbank and FirstRand paid their top three best-paid executives more than double their fixed remuneration in bonuses.

Mpho Makwana, chairperson of Nedbank’s remuneration committee, said Brown’s package was not directly comparable to that paid to FirstRand boss Sizwe Nxasana - whose disclosed package excluded 435?820 shares granted in 2013, and which would add about R14.4?million to his total pay.

Some of Nedbank’s incentives were subject to clawbacks and stringent performance conditions.

FirstRand did not respond to requests for comment.

In 2013, Standard Bank also paid joint CEOs Ben Kruger and Sim Tshabalala, as well as finance chief Simon Ridley, more than double their fixed remuneration in bonuses.

Only Barclays Africa, a subsidiary of London-headquartered Barclays, paid bonuses roughly equal to fixed remuneration last year – an apparent tip to the bonus cap in the EU.

But fixed remuneration for chief executive Maria Ramos and corporate and investment banking boss Stephen van Coller more than doubled.

Barclays Africa remuneration committee chairperson Mohamed Husain said the group had introduced role-based pay to ensure it remained competitive in the context of the bonus cap.

“As a result, fixed pay accounts for a larger portion of the total than before. Notably, the role-based pay attributable to group CEO Maria Ramos is deferred.”

Niche bank Investec, which also has headquarters in London, had not implemented the bonus cap in its last year. Its three best-paid executives – Investec asset management boss Hendrik du Toit, chief executive Stephen Koseff and managing director Bernard Kantor – received fixed packages of about R8?million, but their bonuses were four to 11 times that amount.

The group said in its annual report that the bonus cap would apply in its year to March 2015, but not affect Du Toit’s package, as he was “exempt from these requirements”.

It proposed increasing Koseff’s and Kantor’s fixed pay in line with inflation, but reducing their share of the short-term incentive pool – which was 0.5% of adjusted operating profit – by 10%.

Long-term incentives were dropped in favour of an annual fixed allowance of £1?million (R17.6?million) payable in shares.

These measures were approved by shareholders at Investec’s AGM in August and will see Koseff’s and Kantor’s total packages drop by between 8% to 18% (or up to R7.7?million).

All these banks are well capitalised in terms of Basel 3 bank-capital adequacy requirements and do not have to implement the cash-conservation measures that inspired the EU bonus cap.

Basel 3 rules require banks with a common equity tier 1 (CET1) ratio of 6.375% or lower to pay out no more than 60% of their earnings in dividends, share buybacks and discretionary bonus payments. Investec is skating close to the edge, with operating subsidiaries Investec plc and Investec Ltd’s CET1 ratios at 8.8% and 9.4%, respectively.

The Reserve Bank has imposed a minimum of 5.5%. Requests for comment to its bank-supervision department went unanswered.

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