While new research has predicted British shoppers are going to outspend European counterparts for the festive season – with an average of £499 splashed out on Christmas presents, nearly double France as the second most generous country – bankers might be feeling more miserly than usual after seeing their bonuses for the year slashed.
According to salary benchmarking website Emolument, bonuses for traders and other staff in fixed income, commodities and currencies (FICC) were likely to fall about 9% from payments made for 2014.
Top-ranked MDs could give up as much as £25,000 from last year’s average pay – though this would still leave this year’s at £265,000. Deal advisers also at the top rank might be anticipating a drop of £11,000 to an average of £239,000. Those in the advisory and underwriting division can expect to see bonuses drop 3-5% from 2014, despite a record year for merger and acquisitions, thanks to a steep decline in initial public offerings (down 36% on 2014). MT is sure many will be shedding a tear for those having to tighten their belts on a salary of £200,000 upwards.
‘Previously, receiving a "doughnut" or zero bonus was akin to being encouraged to find employment elsewhere,' said Alice Leguay, a spokesperson for Emolument. 'With ever more restricted bonus pools, it may be that doughnuts become more commonplace, as banks limit substantial bonus payments to staff they simply cannot afford to lose.’ Emolument makes its bonus predictions based on figures on industry revenues supplied by business intelligence firm Coalition Index.
It’s not all (relative) doom and gloom – equity traders might be feeling festive with a 2.3% rise at MD level to £361,000. The numbers aren’t cut and dry of course, with significant variations likely to be seen both between and within banks. Not to mention the drive to keep key individuals could see banks bending over backwards to do so, which includes wooing them with sky-high salaries. For those not in cemented positions, the outlook is less appealing – banks aren’t likely to offer much to those they’re keen on trimming.
Revenues at investment banks are expected to fall 2% from 2014, driven by a drop in FICC trading income. While bonuses tend to reflect trends like this, the likes of Deutsche Bank, Credit Suisse and Barclays are all feeling the heat when it comes to the necessity of cost-cutting.
Discussing the always sensitive issue of bonuses within the industry, Deutsche Bank’s CEO John Cryan recently said, ‘I have no idea why I was offered a contract with a bonus in it, because I promise you I will not work any harder or any less hard in any year, in any day, because someone is going to be pay me more or less.’
A rallying cry to remuneration committees and executives to bring about change? Don’t get too excited. When asked whether he would turn down a bonus for 2015 to 2016 after his bank’s recent poor performance – including a third-quarter net loss of €6.2bn in October – Cryan became coy. ‘This is a matter for the supervisory board,’ was all he offered on the matter. We'll take that as an 'unlikely' for the time being.
Bankers’ incomes have fallen by around a fifth since their peak just ahead of the financial crisis, but it remains considerably better paid than most other non-banking professional careers. Average wages at a sample of nine global investment banks were 5.8 times the average for the FTSE 100 index in 2012 (though this had dropped from 9.5 times in 2006).
New technology and indeed higher interest rates could provide a boost to productivity, while the tail off of hefty fines paid off by banks could also up returns – though the latter in particular isn’t on the horizon quite yet. So, while bankers may be a little blue at their slimmed down bonuses, others will feel this is simply a minute change, with much more effort needed to get pay down across the industry.