Once upon a time, a lot of people in banking were earning high six figure sums and spending Christmas in Mauritius. Not any more. Even if bonuses don't fall by the 64% forecast by the CEBR, a think tank, they're likely to be down this year. Headhunters say far fewer people in investment banking are on track for big, big money. Far more are on track for zero bonuses.
In the City of London, it used to be common for people at vice president level in banks to earn £500k ($805k), says Hugo Eddis, managing director at search firm Longwater. Bonuses this year have yet to be announced, but Eddis says those kinds of sums for anyone below managing director level are now looking unlikely. Lower volumes and pressure on fees means that equities salespeople are likely to especially affected, Eddis predicts. "Last year, I came across a few salespeople who were earning £600-£800k," he says, "There are one or two who are still on £1m, but this could well change."
Michael Karp, CEO of New York-based recruitment firm Options Group, which conducts a global survey of investment banking pay, says results to the survey suggest that cash equities salespeople and traders will be paid significantly less this year and are unlikely to earn large amounts. M&A bankers, ECM bankers and people in solutions businesses are in a similar position says Karp.
If these bankers will be paid poorly, which bankers will be paid well for 2012?
Karp says Options Group's survey indicates that director level staff and above in flow rates businesses, emerging markets businesses and electronic trading businesses are likely to earn $650k or more this year. In electronic trading, Karp says banks are being obliged to pay people well in order to prevent them being poached by high frequency trading platforms like Getco. "This year, I placed a candidate in the US where a director-level salesperson moved into an electronic trading position for $600k," says Karp.
In London, headhunters are similarly optimistic that senior emerging markets professionals will be paid well this year. "Emerging markets salespeople and emerging markets traders should get paid over £500k," says a partner at one search firm. "Gilt traders and salespeople and leveraged finance traders and salespeople have also had a good year," he suggests.
Jason Kennedy at search firm Kennedy Group, which operates in London and New York, says it's going to be very difficult for most salespeople in banks to earn more than £500k this year: "You'd need to be head of sales for a group that's doing exceptionally well."
The only people who will be earning £500k or more for 2012 will be traders who are running prop books internally and below the radar. Most banks still have them hidden in their flow desks, says Kennedy. "But you'd need to be generating a lot of profit for the bank," he points out.