Compensation Advisory Partners (CAP) conducted a study of executive compensation trends in the banking industry. The study includes 18 U.S. banks with greater than $50 billion in assets across three groups: Money Center banks (n=4), Custody banks (n=3), and Super Regional banks (n=11). This report summarizes the pay and performance relationship for these 18 banks in 2022, executive compensation trends in the industry, and outlook for the industry in 2023.



2022 Pay and Performance Outcomes

CEO compensation was mixed across the banks in our sample. Though total pay increased by 3% at median, only half the banks increased total incentives. This was in line with financial performance, which varied by bank based on business mix and balance sheet makeup.


Use of Discretion in Incentive Plans

2022 highlighted differences in philosophies around applying discretion in determining annual bonus payouts. Some banks adjusted payouts to recognize the impact higher than expected interest rates had on performance, while others used calculated results to determine bonuses.


SEC Required Pay versus Performance Disclosure

In the first year of the new disclosure, the banks in our study generally showed strong alignment between compensation actually paid and total shareholder return and most disclosed return on equity as the most important financial performance measure for linking compensation to performance. The disclosure has received limited attention from shareholders and the media to-date.


Potential Non-Compete Bans

The Federal Trade Commission and New York State legislators have both advanced bans on non-compete agreements. Banks should keep an eye on the progress of potential non-compete bans at the federal and state level and confirm compliance implications.


Looking Ahead

2023 has been a volatile year in banking, marked by bank failures in the spring, the rising cost of funds, and potential increases in capital requirements. The impact of these factors on full-year 2023 performance is still uncertain, though shareholder expectations have declined significantly from the beginning of the year and year-to-date total shareholder return is generally negative. As banks begin the year-end compensation decision-making process, they will need to consider how to appropriately balance the need to retain top talent in this volatile environment with their objective to align executive pay outcomes with performance.

Recap – Pay and Performance Outcomes Mixed for 2022

Following a strong 2021, 2022 performance results were mixed among the banks in our study based on business mix and balance sheet makeup. For example, banks that generate a significant portion of revenue from investment banking faced greater headwinds in 2022 than other banks. At median, pre-provision net revenue increased vs. 2021 due to rising interest rates and stronger net interest income; however, Earnings Per Share (EPS) and Return on Equity (ROE) were both down vs. 2021 when banks’ bottom lines benefited from a reduction in provisions for loan losses. 1-year Total Shareholder Return (TSR) was down -19 percent at median over the period for the banks in our sample, commensurate with the S&P 500, which was down -18 percent at median.

The chart below summarizes median performance results for the banks in CAP’s study:


Median Percent Change

Year Ended December 31, 2021

Year Ended December 31, 2022

Earnings per Share



Pre-Provision Net Revenue



Return on Equity (Basis Point Change)

+527 bps

-141 bps

1-Year Total Shareholder Return



3-Year Total Shareholder Return (Cumulative)



Source: S&P Capital IQ Financial Database.

15.0%0.0%18.0% (12.1%)20.6%5.4%20.5%2.7%(15.0%)(10.0%)(5.0%)0.0%5.0%10.0%15.0%20.0%25.0% 2020-20212021-2022Median Change in CEO CompensationMoney CenterCustodySuper RegionalAll Companies

Note: Excludes companies where there was a change in CEO.

In 2022, total direct compensation (i.e., the sum of base salary, annual cash bonus, and awarded long-term incentives) increased 3 percent at median, though changes in pay varied significantly from bank to bank based on performance and other factors. Just over half of the banks in our study increased CEO compensation levels for 2022. Banks that decreased CEO compensation for 2022 did so primarily through the annual cash bonus, which is closely linked to 1-year financial performance. This is in stark contrast to 2021 where most banks paid out bonuses above target, resulting in a 36 percent increase at median due to strong financial performance buoyed by the release of loan loss provisions. 2022 long-term incentives also increased modestly at median (i.e., +6 percent), compared to 2021 when banks increased long-term incentives more significantly (i.e., +21 percent at median).

Incentive Plan Design Trends – Spotlight on Discretion

Most banks in our study did not make changes to annual or long-term incentive plan metrics or structure in 2022. One area of focus in incentive plans revolves around how banks apply discretion to annual incentive payouts. Of the banks in our sample, 56 percent have fully discretionary annual incentive plans. A fully discretionary plan indicates that the compensation committee determines annual incentive payouts based on a holistic review of company and individual performance results. Fully discretionary plans are particularly common among the money center and custody banks. The remaining 44 percent of banks in our sample use formulaic incentive plans that payout based on performance relative to pre-defined goals; however, most of these banks maintain the ability to exercise some discretion over the final payout. These banks incorporate discretion in a variety of ways, including maintaining a weighted discretionary component or modifier, making discretionary adjustments to metrics, and applying discretion to increase or decrease the final payout.

2022 highlighted differences in philosophies around applying discretion across the banks in our sample, specifically with regard to how banks allowed higher than expected interest rates to influence incentive plan payouts. Some banks paid out based on calculated results under their formulaic plan while others made negative discretionary adjustments to recognize that the positive impact of higher than budgeted rates on performance results was outside of management’s control. These differences in philosophy led to differences in actual incentive payouts across the group.

New for 2022 – SEC Required Pay Versus Performance Disclosure

On August 25, 2022, the SEC adopted final rules implementing the pay versus performance disclosure requirement under the Dodd-Frank Act. For the first time in 2023, companies had to comply with the new rule, which requires, among other items, a table highlighting the relationship between pay and various performance metrics, including TSR, net income, and an additional company-selected measure (CSM).

Overall, we saw more similarities than differences in disclosure among the banks in our sample. The banks generally showed alignment between pay and performance and with each other. Compensation Actually Paid, a new measure that considers the change in value of equity awards after grant, was below Summary Compensation Table (SCT) pay in 2020, above SCT pay in 2021, and aligned with SCT pay in 2022. The relationship between Compensation Actually Paid and SCT pay generally aligns with TSR over the period as stock price change is a significant driver of Compensation Actually Paid.

78% of banks used a return on equity measure as the CSM, indicating that most banks view return on equity as the “most important financial measure” used to link Compensation Actually Paid to company performance. Specifically, the most common return on equity measure was Return on Tangible Common Equity (ROTCE).

The disclosure also required companies to select a TSR peer group against which to compare their own TSR performance. Companies could select either an industry index or the peer group used to assess pay. Nearly all the banks in our sample used an industry index for the TSR comparator peer group. The KBW Nasdaq Bank Index was the most common, followed by the S&P 500 Financials Index.

Though the disclosure required significant investment from companies to produce, it has received minimal attention from shareholders and the media. We expect the disclosure to remain compliance-focused in the coming years.

On the Horizon – Potential Challenges to Non-Compete Arrangements

In June 2023, legislators in New York fast-tracked a bill that, if signed, would ban non-compete agreements in the state. This move follows the Federal Trade Commission’s proposal earlier this year to ban non-compete agreements at the national level. As non-compete agreements are especially prevalent in the banking industry, it will be important for banks to keep an eye on the progress of non-compete bans as the New York bill could spark momentum for passing similar bills in other states.

Looking Ahead – Volatility in Banking in the Second Half of 2023

2023 has been a challenging year for banks, marked by the failures of SVB Financial, Signature Bank, and First Republic in the U.S. and Credit Suisse internationally. The shutdown of these major institutions stoked fears about the health of the banking sector. Year-to-date, total shareholder return for the banks in our study is down -21 percent at median while the S&P 500 is up +15 percent.

Though regulators have not finalized any new rulemaking, the bank shutdowns have inspired discussion about regulations that could potentially impact both bank performance and executive compensation practices. Two separate bipartisan groups of senators have introduced two separate clawback bills into the senate. The bills would expand the FDIC’s ability to clawback compensation from the executives of failed banks to different degrees. The most recent is the Recovering Executive Compensation from Unaccountable Practices (RECOUP) Act, which passed the Senate Banking Committee in June.

Additionally, in July, the Federal Reserve’s vice chair for supervision, Michael Barr, proposed a change to the oversight of America’s largest banks that would require banks with assets over $100 billion to increase their capital holdings. The aim of this regulation would be to address vulnerabilities exposed by the collapse of major banks earlier this year and boost resilience during crises. Critics of Barr’s comments say that such regulation will impede these banks’ ability to lend.

As we approach the end of 2023, the outlook for the full year, and in turn, projected compensation outcomes, is less certain. Performance expectations have declined significantly from the beginning of the year – for example, at median, analyst estimates for 2023 EPS have declined 11% from Q1 for the banks in our study. The decline has been more significant for the super regional banks than for the more diversified money center and custody banks. We expect lower results to drive 2023 bonus payouts to be lower than 2022 bonus payouts for many banks. As banks begin the year-end compensation decision-making process, they will need to consider how to appropriately balance the need to retain top talent in this volatile environment with their objective to align executive pay outcomes with performance.

For questions or more information, please contact CAP’s banking team:

Eric Hosken
[email protected]

Kelly Malafis
[email protected]

Shaun Bisman
[email protected]

Mike Bonner
[email protected]

Stefanie Kushner
[email protected]

Banks in CAP’s Study (n=18)

Money Center Banks

  • Bank of America Corporation
  • Citigroup, Inc.
  • JPMorgan Chase & Co.
  • Wells Fargo & Company

Custody Banks

  • The Bank of New York Mellon Corporation
  • Northern Trust Corporation
  • State Street Corporation

Super Regional Banks

  • Citizens Financial Group, Inc.
  • Comerica, Inc.
  • Fifth Third Bancorp
  • Huntington Bancshares, Inc.
  • KeyCorp
  • M&T Bank Corporation
  • The PNC Financial Services Group, Inc.
  • Regions Financial Corporation
  • Truist Financial Corporation
  • U.S. Bancorp
  • Zions Bancorporation