Top managing directors in mergers and acquisitions and corporate finance, who last year bagged salary and bonus packages of about $4m (€4.5m) will have to content themselves with $1m - $2.5 m this year, a survey suggests.
In technology, media and telecoms (TMT), last year's hottest sector, few will make even $2m. At executive director level, meanwhile, only the very highest paid key talent in top tier institutions will hit the million dollar mark in 2001, says the report on investment bank compensation in Europe by the headhunter Armstrong International.
In second tier institutions, defined by the report as ABN Amro, HSBC, Bear Stearns, Hawkpoint, Close Brothers and Cazenove, key managing directors will be taking home $500,000 - $1m. An ordinary associate in these firms, with three to five years experience, might only just make six figures with packages of $100,000 - $150,000.
The most notable trend this year, say the report's authors, is a levelling of pay across different industry sectors. "Whereas last year you could definitely say that telecoms people as a whole would be much better paid than aerospace, this year the variations between the better and less well performing sectors are not so great," says Aidan Kennedy, a spokesman for Armstrong.
Where differences in performance, and therefore pay, will arise this year, they will be down to the success of particular teams in some banks in maintaining deal flow, rather than the sector as a whole performing well. Even so, says Kennedy, pay variations are unlikely to be as large as last year even for top performing teams, since there will be a greater redistribution of the bonus pool in many institutions, to ensure that bankers in the weakest sectors at least get something.
The hardest hit sector this year has been TMT, while biotech too has seen a big drop off. Financial institutions group work and utilities, by contrast, have continued to do relatively well.
The recruitment picture is also less than rosy. Armstrong calculates that leading investment banks around Europe have slashed 30,000 jobs this year, with further cutbacks expected. Nevertheless, all institutions are continuing to make certain strategic or opportunistic hires. These, says the report, typically require a strong senior internal sponsor and, in several banks, the approval of two board directors for any hires at director level or above.
Some banks are continuing with significant hiring programmes. For example, HSBC has been looking to hire 100 corporate financiers, predominantly in Europe and Deutsche Bank has been seeking 40 corporate financiers, the report says.
In all institutions, says Armstrong, the emphasis is on hiring originators rather than execution specialists.
Another trend observed by Armstrong is a resurgence of the generalist banker. Last year, there was a consensus that the days of the generalist were numbered, as institutions sought to build up highly specialised sector or country teams. This year as deal flow has dried up in many industry sectors, numerous specialists have been left twiddling their thumbs.
This has created an environment, says the report, in which talented and flexible generalists, relationship managers and country bankers can flourish.
The report also points out that 2001 has been a good year for boutiques. The impetus is twofold. On the one hand robust deal flow over the past two years has created conflicts for the bigger players. On the other, a growing sense of disenchantment with the impersonal service of giant global players has opened the field up to smaller operators.
Houses such as NM Rothschild and Lazard have profited as a result - a trend Armstrong believes is set to continue.