Merrill to slash bonuses by 50%

Merrill Lynch & Co plans to cut year-end bonuses in half after more than $20 billion of losses that forced the US securities firm to sell itself to Bank of America Corp, two people with knowledge of the situation said.

The average bonus reduction will be about 50 per cent at the New York-based company, and some traders and investment bankers will face steeper cuts, said the people, who declined to be identified because the plans aren’t public. While employees won’t find out their bonuses until later this month, division managers are being told now how much they’ll get to distribute.

Merrill’s revenue through September fell 96 per cent from a year earlier, forcing Chief Executive Officer John Thain to slash compensation, the firm’s biggest expense. Congressmen and regulators scrutinising Wall Street pay have sought to ensure that economic-rescue funds from the US government are used to stimulate lending and not to enrich executives.

The drop in bonuses at Merrill would be less severe than the 70 per cent average cut for all Wall Street firms that compensation consultant Johnson Associates predicted last month. Bonuses make up the bulk of a year’s pay for most traders and investment bankers, and they usually fall when markets sour.

Merrill spokeswoman Selena Morris declined to comment. The shares slipped 1.9 per cent to $11.34 in German trading on Wednesday.