The return of the big cats? Bank bonuses rise as profits rebound

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  • Barclays and HSBC among banks completing bonus pools
  • European banks lag behind Wall Street pay hikes
  • The tightest hiring market in a decade
  • Banks risk backlash on payments during pandemic

LONDON, Aug. 5 (Reuters) – European banks are putting money aside to pay one-off bonuses to top performers, amid a frenzy of deals driven by pent-up demand from the COVID-19 pandemic and the rebound in bank profits.

Banks have added billions of dollars to bonus pools as they try to reassure restless staff that they will be rewarded in 2021 after a meager 2020.

The expected payouts are more modest than the windfall bonuses on Wall Street, but European banks nonetheless risk a public backlash at a time when many businesses and individuals are still battling the pandemic, Fair Wage advocacy groups have said.

British firm Barclays (BARC.L) increased its bonus pool by 46% to 1.1 billion pounds ($ 1.5 billion), from 749 million pounds a year earlier, while HSBC (HSBA. L) completed his $ 900 million bonus pool in the first half. Read more

Standard Chartered (STAN.L) said that a “normalization of performance-related pay” in the first half of the year resulted in an 8% increase in costs, to $ 5.1 billion. Read more

Senior bank executives and recruiters have said the market is the most competitive they have seen in a decade, as economies rebound around the world, pent-up demand and the fashion for investing through acquisition companies to special use (SPAC) stimulate trading activity.

Swiss bank UBS (UBSG.S) raised salaries of its financial advisers by $ 242 million in the second quarter after posting higher revenues, while Deutsche Bank (DBKGn.DE) increased salaries and benefits social benefits of its investment bank by 6% compared to the same period. one year ago.

Bonuses and salary increases are expected to continue to pile up in the second half of the year, said Sophie Scholes, UK financial services practice manager at Heidrick & Struggles headhunters.

“The banks predict that the next bonus round will be the one they have to pay, due to two factors,” she said.

“One is pure competition for talent, and that means retaining the right people, and the second is that because of all the activity in the market, people have a good pipeline and good wins behind them, and banks are trying to prepare for it. “

The trend is global, Scholes said, with banks in Europe and Asia catching up with the United States.

Goldman Sachs (GS.N) increased compensation by $ 3.5 billion from the previous year, while JPMorgan (JPM.N) added $ 2 billion.

Goldman also increased the base salary for juniors to $ 110,000 after rivals such as Morgan Stanley (MS.N) and JPMorgan increased their freshman salaries.

This is prompting its European rivals to follow suit, with HSBC telling staff this week that it will pay newly-hired analysts at its US investment bank $ 100,000 a year. Read more

“The United States is extraordinary in terms of activity, which is because its economic recovery is seen as more robust, and it has always been a very buying market in terms of talent,” said Scholes.

“DOUBLED MORAL”

As the big payouts are back, in Britain rules that cap payments at twice the base salary level and concerns over the public’s perception of bankers’ bonuses during a global crisis mean lenders are doing something wrong. proof of a certain restraint.

“Paying huge bonuses at a time when businesses and households are struggling and the economic outlook remains so uncertain is not only morally dubious but financially irresponsible,” said Simon Youel, head of policy and advocacy at Positive Money .

Youel said much of recent bank profitability could be attributed to state support measures for the economy. British newspaper articles suggested that British banks were pushing to remove the bonus cap from double base salary, which Youel said the government should reject.

The volatile nature of income for investment banks means they have to cut back on variable pay to manage profitability in tough times, Barclays chief executive Jes Staley said, and also pay when business is booming.

“When we have actually generated really strong revenue growth, that is reflected in the compensation… we think we are careful in the way we run it,” he told reporters last week during a conference call.

A bank’s board rejected an executive’s assessment of his team as being too generous and told him to downgrade it for fear of having to pay too much, Scholes said.

Even traditionally more conservative retail banks are raising wages.

Lloyds (LLOY.L), the UK’s largest mortgage lender, has said it will spend an additional £ 100million on premiums this year, having cut them off for everyone except its lowest-paid staff last year.

Bank executives have said they should keep paying despite concerns about public perception.

“We have to reward people,” said the CEO of a British bank, without wanting to be identified. “People have had a rough time, and if you’ve stayed in a role and been locked in and had to go beyond it, you expect to be rewarded.”

($ 1 = 0.7189 pounds)

Reporting by Lawrence White and Iain Withers, additional reporting by Brenna Hughes Neghaiwi in Zurich and Tom Sims in Frankfurt. Editing by Jane Merriman

Our Standards: Thomson Reuters Trust Principles.


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