Return of the fat cats? Europe's bank bonuses rise as profits rebound

Europe’s banks are stashing cash to pay bumper bonuses to top performers, amid a deal frenzy driven by pent up demand from the Covid-19 pandemic and rebounding bank profits.
 
Banks have added billions of dollars to bonus pools as they try to reassure restless staff they will be rewarded in 2021 after a lean 2020.
 
The planned payouts are more modest than the bonus bonanza on Wall Street, but European banks nonetheless risk a public backlash at a time when many businesses and individuals are still struggling in the pandemic, advocacy groups for fair pay said.
 
Britain-based Barclays  increa­sed its bonus pool by 46 per cent to 1.1 billion pounds ($1.5 billion), up from 749 million pounds a year earlier, while HSBC topped up its bonus pool by $900 million in the first half. Standard Chartered said a “normalisation of performance-related pay” during the first half drove an 8 per cent jump in costs, to $5.1 billion. Senior bank executives and recruiters said the market is the most competitive they have seen in a decade, as rebounding economies worldwide, pent-up demand and the fad for investing via Special Purpose Acquisition Companies (SPACs) drives dealmaking activity.
 
Swiss bank UBS boosted pay for its financial advisers by $242 million in the second quarter after booking higher revenues, while Deutsche Bank upped pay and benefits in its investment bank by 6 per cent compared with the same period a year ago.
 
“Banks are anticipating that the next bonus round will be one where they need to pay out, driven by two factors,” she said.
 
“One is the sheer competition for talent, and that means retaining good people, and two is that because of all the market activity people have a good pipeline and some good wins behind them, and banks are trying to prepare for that.” The trend is global, Scholes said, with banks in Europe and Asia playing catch-up to the US. Goldman Sachs has increased its compensa­tion by $3.5 billion on the prior year, while JPMorgan has added $2 billion. Goldman has also raised base pay for juniors to $110,000 after rivals such as Morgan Stanley and JPMorgan increased first-year pay.

This is prompting European rivals to follow suit, with HSBC this week telling staff it would pay newly hired analysts in its US investment bank $100,000 a year. "The U.S. is extraordinary in terms of activity, which comes from their economic recovery being seen as more robust, and it has always been a highly acquisitive market in terms of talent," Scholes said.
 
While big payouts are back, in Britain rules that cap payouts at twice the level of base pay and concerns about public perception of banker bonuses during a global crisis mean lenders are showing some restraint.