London’s investment bankers are looking forward to big rises in their annual bonuses this Christmas, reversing two years of decline.
A survey by the recruitment consultants Armstrong International suggests that bonuses will rise by between 10 and 20 per cent this year as confidence returns to the City. Bonuses fell by an average of 30 per cent in 2002 and 40 per cent in 2001.
Aidan Kennedy, partner at Armstrong, said: "There is now a cautious optimism with bonus payments. People have gone through so many redundancies, pay freezes and cost cuttings, that the top management is now aware that it must reward them this year and send out a more positive message.
“Cost trimmings are now coming in other places, such as expenses accounts for entertaining."
Kennedy added that firms were keen to reward middle-ranking vice-presidents and associates who have borne the brunt of increasing workloads and cost savings over the past few years.
“Management knows they’ve put immense pressure on this level of staff and are afraid of losing talent,” he said.
The research, which looked at the expected packages offered by 11 major investment banks, found that the biggest winners in the bonus stakes will be those working in fixed-income products, hedge funds and debt capital markets. Specialists in these areas will see their bonuses by up 50 per cent with some managing directors likely to be awarded “north of £3 million”.
But the days of "star” equity analysts seem to be coming to an end as regulators tighten up the rules on conflicts of interest between the research and investment arms of the same firm. Only a handful of analysts can expect to receive more than £600,000 this year, the report said.
The return of the big bonus comes after three years of falling stock markets and a corresponding drought in merger and acquisition activity. But the survey found that the bulk of redundancies were now over and predicts a rise in the recruitment of credit and equity derivative specialists during 2004.
The boom has also been fuelled by surging profits at some of the largest banks and signs of economic recovery in the USA. Merrill Lynch, which shed a third of its staff over the past three years, recently reported bumper third-quarter results while Lehman Brothers announced last month that it was offering staff a £6,000 bounty for every executive they manage to poach from rival companies.
