Barlcay's is joining the long list of investment banks ramping up pay for its employees. The bank is expected to boost its bonuses by more than 25% this year after record results and in a global competition to retain talent in the industry.
The boosts in pay are a stark delta from 2020, when pay rose about 10%, Bloomberg reported this week. But with "deal making at record levels" in 2021 and profits "surging", banks have made the decision to bump bonus pay for employees higher.
Barclay's Chief Executive Officer Jes Staley said in October: “Variable compensation, or the bonus pool, that’s very much tied to the performance of the corporate and the investment bank and I think you’ll see variable compensation higher this year given that they’ve generated record profits.”
Deutsche Bank is also reportedly considering a similar move, mulling boosting bonuses for its dealmaking and underwriting units by 20%, the report says. The bank's head of investment banking, Mark Fedorcik told Bloomberg that compensation in his unit would be “commensurate with performance and market" and that “demand for talent is the highest [he had] ever seen.”
Goldman and JP Morgan are also likely to follow suit, considering "boosting bonus pools for their underwriting and deal advisory units by 50% and 40%, respectively."
The 25% number is still "preliminary and a final decision hasn’t been taken yet," the report noted.
We noted back in November that bonuses were on pace for their biggest jump since the global financial crisis.
In particular, overall bonuses for investment banking underwriters were expected to jump 30% to 35% over last year, we noted, while investment banking advisors and equities traders should expect a 20-25% boost. Bonuses for private equity, asset management and hedge fund professionals are expected to see double-digit increases as firms shell out large premiums to both procure and retain talent.
Meanwhile, base salaries are also set to climb as heightened attention has been given to junior bankers. Goldman, for example, recently raised salaries for their entry-level investment bankers from $85,000 to $110,000.
According to Johnson Associates managing director Alan Johnson, firms are "very concerned about turnover, even though pay is going to be up significantly."
Johnson Associates used public data from banks and asset management firms, along with proprietary insights from clients, to calculate the projected year-end incentives on a headcount-adjusted basis. Some investment banks, including Goldman Sachs, disclose how much management has set aside for employee compensation in quarterly earnings reports. -CNBC
The last time bonuses increased this much was during the credit crisis, when 2009 saw bonuses jump 30% to 60% over the previous year.
We're sure that this time, it's different...