While most Britons struggle to cope with a brutal squeeze on their spending, the City of London's investment banks are preparing for a bonus boom after raking in huge increases in fees.
Despite widespread rumblings of discontent over what they charge, investment banks levied a total of $48.9bn (£30.5bn) in fees in the first half of this year, a study by Thomson Reuters found. That represented a 23 per cent rise on the same period last year and was the best opening half since 2007, before the financial crisis squeezed off the fees pipeline as deals and company flotations dried up.
Fees charged in Britain have risen more slowly but were still up a massive 16 per cent to £1.7bn. It means that, come bonus time, bankers will be expecting six or seven-figure payouts again, even if new rules demanding that at least part of the pay of "star bankers" is deferred and paid in shares mean that they have to wait to pocket the cash. Bonus pools are typically based on a percentage of the fees generated by banks.
JP Morgan was the biggest fees "whale", raking in $3.4bn, nearly 7 per cent of the global fees "wallet". Morgan Stanley was the biggest climber – its $2.7bn fees total was a stunning 48.9 per cent rise on last year. Six of the top ten earners were American banks.
The Americas generated the biggest regional increase in fees – up 26.9 per cent. Despite Europe's economic woes and growing panic about Greece and other debt-ridden eurozone nations, the Continent also posted a substantial rise in fees of 26.4 per cent. Only Japan registered a fall, with fees paid by her companies tumbling 23 per cent.
In January, the Office of Fair Trading raised concerns about fees after finding that investment banks had sharply raised their charges to companies for services such as underwriting shares issues. Companies now pay 3 per cent of the total amount raised from any share issue, compared with 2.5 per cent before the financial crisis.
News of rising bank fees will revive the debate about the City's destructive bonuses culture.
Brendan Barber, the general-secretary of the Trades Union Congress, said yesterday: "The large increase in fees collected by UK banks shows that the good times are rolling in the City again. This will astonish the millions of credit-starved businesses and people struggling for a mortgage, who can't persuade the banks to lend."Reuse content