City banks poised to pay bumper bonuses
Bonanza: Rejuvenated Barings leads the way in multi-million payouts
Monday 11 December 1995
Executives at Barings, bought after its dramatic collapse with losses of pounds 900m earlier this year by the Dutch banking group ING, are expected to receive about pounds 20m in total. A spokesman for ING yesterday confirmed bonuses would be paid at Barings. "We earlier said we would pay them as normal. The figures are a private matter with regard to personnel."
In addition, it is thought that Andrew Tuckey, the former deputy chairman of Barings at the time of the bank's collapse, will receive a fee of around pounds 500,000 from the bank. He continues to act as a consultant to Barings, working in an office on its executive floor. His 1994 bonus, due to be pounds 1.6m, was not paid. Mr Tuckey, who was unavailable for comment yesterday, is the subject of an investigation by the Securities and Futures Authority.
Barings and Goldman Sachs are among the leading beneficiaries of this year's takeover boom. Corporate finance activity in the City has returned to levels not seen since the frenzied days of the late 1980s. One senior banker said at the weekend: "Corporate finance departments have made a bucketload of money this year."
Barings' profits have stemmed from its role in several big deals, dominated by the pounds 9bn pharmaceuticals merger between Glaxo and Wellcome. It is also advising on the take- over of TSB by Lloyds Bank for pounds 6bn - helped by Mr Tuckey - and acted in the pounds 1bn Scottish Power bid for Manweb.
ING bought the profitable Barings businesses for pounds 1 after the bank's losses in Singapore brought it to its knees. It paid pounds 660m to creditors. However, shareholders in the bank and many bond investors have received nothing.
Last night Jonathan Stone, chairman of the bondholders action group, said he thought it was a "very poor judgemental decision by ING to pay further bonuses without first making any offer to the bondholders who have lost around pounds 100m".
Goldman Sachs has been another big winner in this year's surge in mergers and acquisitions. One of its biggest deals was acting for Eastern Electricity in its takeover by Hanson. Goldman's worldwide profit is thought to have more than doubled to above $1bn.
Bonuses at the investment bank are not expected to match the records set in 1993, when 100 staff received more than $1m each. Even so, payouts on this scale could go to more than 50 employees.
Other big beneficiaries of the wave of takeover activity in the electricity and water industries will include Schroders and Kleinwort Benson. Other investment banks which have seen a big increase in the amount of corporate finance business this year include SBC Warburg, Lazards, Morgan Stanley, Flemings and Deutsche Morgan Grenfell.
Fees generated by electricity and water takeover bids have been estimated at more than pounds 300m. Total mergers and acquisitions-related fees for the year could easily top pounds 1bn.
Not all investment banks will have shared in the boom to the same extent. Takeover activity on the Continent has been far more muted than in Britain, so banks such as Merrill Lynch, which do more business in the rest of Europe, are likely to have enjoyed less spectacular growth in fees in 1995 after a healthy performance in 1994.
However, income from trading activities has also picked up in the latest few months of this year. Even though most banks have relatively small positions after being stung by trading losses in 1994, this improvement should have been enough to guarantee healthy bonuses across almost the entire sector.
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