Junior investment bankers are paid well. But they are not paid equally. Recruiters say there are now massive discrepancies in the salaries on offer to associates and vice presidents (VPs) working in IBD at leading investment banks.
At the top of the tree are the junior bankers at Morgan Stanley. In salary terms, recruiters say the U.S. bank is far and away the best payer. "Morgan Stanley are paying associate 1s £100k, associate 2s £112k and associate 3s £122k" ($147k, $165k, and $180k respectively)," says one recruiter in London. "They're massively ahead of the market," she adds.
At VP level, another recruiter tells us that Morgan Stanley is paying salaries of £170k. "That's huge compared to European banks like Deutsche, which are still offering £115k," he says.
Both Morgan Stanley and Deutsche Bank declined to comment on pay figures. The Financial Times reported in February that Deutsche is 'reviewing' its pay levels for juniors. Recruiters say the German bank is expected to hike salaries in April, although it's unclear whether they'll reach the stratospheric levels of Morgan Stanley. In the meantime, the chief executive of another recruitment firm says Deutsche's IBD juniors are, "particularly disappointed" with their fixed pay.
Overall, recruiters in London say that most U.S. investment banks have now increased salaries for associates and VPs in IBD and that most European banks haven't. The exception appears to be UBS, which has hiked salaries and now pays slightly above the market rate, albeit less than Morgan Stanley.
"The differential between associate and VP salaries at the top-paying banks and the banks which haven't increased salaries yet is huge," says Andrew Pringle at recruiter Circle Square Talent. "We're ending up with a two-tier system in which the banks paying lower salaries risk a brain drain."
While associates 3s at some European banks are getting £95k, for example, at Morgan Stanley they're said to be receiving £27k more.
Another IBD recruiter, speaking on condition of anonymity, says that when bonuses are factored in, total pay at the banks concerned is likely to be similar. "But it's always better to get paid on base."
Some recruiters suggest the yawning gulf in salaries between top-paying and bottom-paying firms is a reflection of working hours. Notably, Morgan Stanley is one of the few banks not to have imposed fixed restrictions on the number of hours its juniors work. By comparison, at Barclays (where recruiters say salaries have been hiked, but not by that much), the emphasis is all on 'empowering the young' and ensuring juniors don't get worked to death.
Old and new salaries for associates and VPs. Most Europeans are still paying 'old' salaries, US banks have increased to 'new' levels
Associate 1 - Old: £75k. New: £90k
Associate 2 - Old: £85k. New: £100k
Associate 3 - Old: £95k. New: £110k
VPs. Old: £105k-£110k (occasionally £125k max). New: £140k-£160k (allegedly £170k at Morgan Stanley).