U.S. investment banks, with their traditional generosity and easy side-step of the EU bonus cap rules, have long been the place to earn the biggest big bonuses in London, while their European counterparts flounder under the weight of regulatory intervention and political pressure. The real places to avoid, though, are German banks.
German banks in the UK paid average bonuses of $63.5k this year, according to the eFinancialCareers 2014 bonus survey, compared to $101.3k at U.S institutions, $80.5k at British firms and $66.8k at Swiss banks.
Deutsche Bank’s remuneration report suggests that it’s being prudent with pay for its investment bankers. It has yet to introduce ‘allowances’ – monthly performance-related pay that is definitely not a bonus – and has made no mention of hikes in base salary to avoid the EU bonus cap. What’s more, deferrals only start at €100k and, of the 8,577 people working in the front office of its investment bank, just 4,700 were required to defer some of their pay, suggesting there are a lot of people earning under six-figures. Average bonuses per head in the corporate and investment bank for 2013 were €83.2k, it says, and its compensation bill fell by 14% on the previous year.
Commerzbank has yet to release its 2013 compensation report, but set aside €95m in bonuses for its 2,053 investment bankers in 2012, or an average of €46.2k. What’s more, just €7.6m was paid out in immediately available cash.
U.S. investment banks only have to get approval from a small internal group that holds the shares of their UK subsidiaries to side-step the bonus cap of two times salary, while banks in Europe have get the go-ahead from all shareholders. Pay per head at Goldman Sachs shrunk this year, but not greatly, with average pay of $383k, down from $400k per head in 2012.
Some UK banks have already defended the bonus culture. Barclays CEO Anthony Jenkins saying big bonuses for investment bankers were necessary to avoid a “death spiral” of talent departing the bank for competitors not so constrained on pay. Its compensation bill dropped by just 2% year on year. HSBC, meanwhile, has been handing out generous allowances.
The big Swiss banks have a new-found generosity in 2013. After two years of cutting back on payments, the overall bonus pool at UBS swelled by 28% this year, but this is not the only benefit. It has a generous CHF300k deferral point, meaning that most junior to mid-level bankers will be getting all their bonuses in cash this year and it has also actually reduced the number of code staff in the UK, key risk takers who are subject to the most aggressive pay restrictions, from 188 to 156 people (a tiny fraction of its investment banking employees). Credit Suisse may delaying bonuses and creating increasingly convoluted payment schemes, but pay only reduced by 3% this year.
German banks, it could be argued, are the outliers.