European investment bankers are set to enjoy increased bonuses after a bumper year for trading and dealmaking amid the coronavirus pandemic, while their counterparts in other parts of the business see their payouts cut or cancelled altogether.
Credit Suisse and Barclays — the first of the region’s major investment banks to disclose their plans — this week boosted payouts and justified their decisions by citing “pay for performance” policies, and the need to stop staff defecting to more generous Wall Street rivals.
By contrast, staff at Italy’s Intesa Sanpaolo and Germany’s Commerzbank have had their payouts cut by as much as half. Lloyds Bank in the UK cancelled bonuses altogether.
More big global lenders will reveal their plans soon, with HSBC and Standard Chartered reporting full-year results on Tuesday and Thursday, and UBS releasing its annual report on March 5.
European bank bosses face a tricky balancing act between rewarding staff who capitalised on a boom in trading, listings and dealmaking last year, while acknowledging the bleak macroeconomic environment and seeking to avoid tarnishing the improved public image they have fought hard to rebuild since the financial crisis.
Thomas Gottstein, chief executive of Credit Suisse, told the Financial Times investment bankers at Switzerland’s second-biggest bank by assets received “double-digit” payouts, while the bonus pool for the whole group shrank by 7 per cent.
“That’s the essence of pay of performance,” he said, alluding to the investment bank’s 18 per cent annual increase in revenues.
Barclays increased its bonus pool by 6 per cent to £1.6bn after its investment bank produced its highest annual revenue since at least 2014.
While bonuses were cut in its corporate and consumer divisions where profits fell, they rose at the investment bank, where three-quarters of the pool was allocated to staff outside the UK, notably in New York. The bank’s traders were the main driver of profits last year and “we have to be responsive to that”, said Barclays chief executive Jes Staley.
Investment banks across the world generated a record $124.5bn in fees last year as companies raced to raise cash in order to survive the pandemic. Traders benefited from extraordinary levels of market volatility and unprecedented liquidity support from central banks, which drove clients to reposition their portfolios and sent stocks to record highs.
Regulators have been clear they will watch bonus payments closely. Last week the European Central Bank shot down Deutsche Bank’s plans to increase its bonus pool by more than a third, to more than €2bn, after Germany’s largest lender reported a small profit for the first time in six years.
When the ECB and Bank of England…