Big payments made, and big payments looming large, was how the banking sector played out this week.
The payments made went to the captains of exactly half of the nation's big four banking giants. On Thursday, Citigroup (NYSE:C) revealed via a regulatory filing that it had hiked CEO Michael Corbat's total compensation for 2013 by 23% to roughly $14.1 million.
That's a bit incongruous given the overweight lender's stated goal to slim down on costs. But given that the stock rose after the news hit the wires, it seems investors didn't mind too much. We'll see if the same can be said for the lower ranks of the company's management, the field officers who will be most directly responsible for enacting those spending cuts.
A day before Citi spilled the beans on Corbat's pumped-up salary, Bank of America (NYSE:BAC) revealed that it had lifted CEO Brian Moynihan's 2013 total compensation by 17% to... $14 million, which is apparently the benchmark for monster bank chief executive pay these days. The argument for giving Moynihan a hefty raise is stronger, as Bank of America's fourth-quarter results were impressive by nearly any standard, while Citi's were ho-hum or disappointing depending on how bearish the analysis.
Neither man, of course, can approach the $20 million stack of change taken home by JPMorgan Chase (NYSE:JPM) honcho Jamie Dimon for his work in 2013. The difference is, JPMorgan is a company much more indelibly stamped with the personality of its charismatic, high-profile lightning rod of a CEO. By comparison, Corbat and Moynihan are more head-down, do-the-job technocrats.
All three men had their hands full this week, particularly Moynihan. There was movement in Bank of America's proposed $8.5 billion settlement with a set of disgruntled investors who lost money on securities backed by the firm's ugly stepchild of a subsidiary, Countrywide Financial. The judge in the case dismissed a challenge to the settlement from insurance conglomerate American International Group (NYSE:AIG). This propels the deal forward, but as it's a massive beast investors should anticipate another roadblock or several before it's fully resolved, not least from the seemingly determined AIG.
Zooming out on macroeconomic developments affecting (or not) the sector, the minutes of the Federal Reserve's last meeting with Ben Bernanke as chairman were released this week. As expected, there was nothing too shocking or revelatory in the literature, save for the moderately interesting tidbit that the participants couldn't quite agree on how to adjust their commitment to wafer-thin interest rates when and if the unemployment rate dips below the longstanding target of 6.5% (the January figure was 6.6%).
Meanwhile, on Wednesday the Census Bureau released the January figure for housing starts. For obvious reasons, this is an important metric for mortgage lenders, particularly the segment's clear no. 1, Wells Fargo (NYSE:WFC). Housing starts for the month totaled roughly 880,000, 16% underneath the December figure and 2% lower than the January 2013 number. Much of the decline, however, was expected due to the awful, construction-halting weather buffeting much of the nation during the month, so the market didn't seem too spooked about potential knock-on effects for businesses connected with the activity.
So all in all, this past week's news for the big banks mainly swirled around who was getting paid, and to what degree. The 2013 compensation packages for Citigroup's Corbat and Bank of America's Moynihan are now in the pockets of those two men; going forward more deeply into 2014, both will need to demonstrate that they're worth the money.