As the Christmas shopping season draws near, European investment bankers and securities traders who have survived successive rounds of layoffs can take some comfort: The big bonus is making acomeback, at least in a few of the most profitable areas of their industry.
With stock markets rebounding and the lucrative mergers-and- acquisitions business showing tentative signs of life, bonuses paid to top bankers and other professionals in Europe will rise by about 10 percent to 20 percent when payouts are made early next year, according to a survey published Wednesday by an executive search firm, Armstrong International.
That follows a decline of 30 percent to 40 percent a year ago, according to Aidan Kennedy, head of research at the firm. Since the last bonus season, profits of many Wall Street firms and some of their European competitors have rebounded strongly. On Tuesday, for example, Credit Suisse Group reported a profit in the third quarter after a loss a year earlier.
After paring compensation, which makes up the bulk of an investment bank’s costs, and curbing other expenses during the downturn, many banks are ready to reward some of their remaining employees, the Armstrong survey found.
There’s a far greater positive feeling with regards to bonuses than we’ve had for several years, Kennedy said.
The study indicates that the upbeat mood will be most apparent in some of the businesses that have performed the best this year, including derivatives. There, bonuses for traders based in London and elsewhere in Europe may rise by as much as 30 percent to 50 percent.
A managing director in interest-rate trading at one of the big firms can expect a bonus of $1 million to $5 million, on top of a base salary of $100,000 to $225,000, the study found. Lower-level traders earn far less.
The growth in compensation for interest-rate and derivatives specialists is driven in part on demand for their services from smaller firms and hedge funds that have hired aggressively as they move into areas where the larger firms are less willing, or able, to grow.
Mako, a London-based firm that trades derivatives and runs hedge funds, has expanded its staff to about 230 from 55 in 1999, said its chief executive, David Segel. He said Mako was growing in part because it is willing to take on a level of risk that the big brokerage houses increasingly want to steer clear of in their proprietary trading.
At the big investment banks, amid a continuing slump in mergers and acquisitions, the dealmakers who provide advice on corporate transactions are not faring as well as many traders.
Bonuses for European investment bankers will rise by up to 15 percent, the Armstrong study says. But some bankers are optimistic about next year, based on recent increases in mergers-and- acquisitions activity on Wall Street.
