Prop trading predictions come to pass

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Last week we predicted that prop trading losses could put a dampener on this year's bonuses. Unfortunately for bankers at the likes of Credit Suisse, UBS and Deutsche Bank, our predictions appear to have come true.

The website dealbreaker.com has been running speculation from various sources claiming that employees of Credit Suisse are worried this year's bonuses might be affected by bad trades - notably an estimated $120m loss on South Korean derivatives.

Meanwhile, both UBS and Deutsche Bank have lost money on their trading desks. Deutsche Bank said today that overall sales and trading revenues fell 6% to €2.69bn following difficulties in equity prop trading. And revenues at UBS' fixed income, rates and currencies division fell 7% following a bad bet on US interest rates.

Payouts may also be muted at JP Morgan, where well-known cost cutter Jamie Dimon is now chief executive - although the bank has stressed its first half fees were up 42% and performance-related compensation was up 35% in the same period.

"It is all the same thing - Credit Suisse's loss on the South Korean derivatives and JP Morgan, which had a big write off in Q3 - so it is all much of a muchness," confirms one head-hunter, who declined to be named.

"If the loss is not directly down to you, and if you are in that top tier, normally the top 5-10%, then they will probably look after you. Otherwise you will probably have to suffer the consequences," he warns.

The difficulty with this kind of rumour is that those speculating may not see the bigger picture, cautions one leading London financial analyst who also did not want to be named, such is the sensitivity of this issue.

"You can have losses but, as long as they are not too big, they may not show up on a group basis - and we certainly have not heard anything specific," he says.

"Your bonus will of course depend on how well your desk is doing, but there may have been a huge profit."

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