City bonus bonanza keeps on rolling

Schroders and Warburg reveal bumper payouts and higher staff costs n SFA confirms it is looking into Kepit liquidation share sale

Two of the City's leading investment banks yesterday announced big bonus payment rises, fuelling fears that bumper payouts may encourage risk-taking of the kind recently criticised by the Bank of England.

Schroders said that staff costs last year rose by pounds 109m to pounds 464m - an increase of 30 per cent. About half the increase was due to the payment of higher bonuses after the bank earned record profits of pounds 239m.

Meanwhile SBC Warburg, the Swiss-owned investment bank, disclosed that costs last year had risen by a third to $2.6bn (pounds 1.63bn), an increase it blamed partly on "performance-related compensation".

Schroders disclosed that staff costs per employee last year rose from pounds 78,500 to pounds 93,300 as the bank took on an extra 1,450 employees. The ratio of staff costs to income rose from 44.4 to 48.5 per cent. However, pre- tax profits per employee also rose from pounds 43,600 to pounds 48,000.

Win Bischoff, chairman of the bank, said that what the Bank of England had said about the dangers of the City's "bonus culture" was "a useful adjunct to the debate". But he stressed that Schroders operated a deferred bonus scheme and had done so for several years.

The increase in bonuses at SBC Warburg was accompanied by a 55 per cent increase in profits to $607m and a big improvement in its return on capital to 16.4 per cent.

However, the results were marred by confirmation from the Securities and Futures Authority that it was investigating the alleged mishandling by Warburg's of a large share sale late last year. At least two senior traders have already been disciplined over the episode.

Peter Corrigan, head of French equities, resigned last week and a derivatives trader has also left.

The allegations revolve around the liquidation of the Kleinwort Benson European Privatisation Investment Trust (Kepit) late last year.

Warburg was accused by Merrill Lynch, acting for Kepit, of deliberately marking down the prices of the shares just ahead of executing the trade, so disadvantaging the client to its own benefit.

As reported by the Independent at the time, the affair was quickly settled to Kepit's satisfaction after Warburg agreed to pay more advantageous prices, at a cost to itself of pounds 3m to pounds 5m.

Warburg said yesterday that as soon as it became aware of the allegations an immediate investigation was launched by its compliance department and the bank quickly moved to ensure the client had not been disadvantaged. It confirmed that the outcome of its deliberations had resulted in the departure from the bank of two traders.

At the time the Independent quoted a Warburg source as saying: "It's no big deal. This sort of thing happens the whole time. This was a programme trade. The timing had been pre-set and it was unfortunate that it occurred when prices were weak as a result of a rise in interest rates."

However, Merrill Lynch and others were persistent in their allegation that the prices had been deliberately depressed by market-makers and called on the SFA to investigate.

The prices began to fall after Warburg attempted to hedge the position ahead of execution. One source described the manner of the hedging as "inept though not deliberate".

The bank said one of the advantages it enjoyed over competitors was "the loyalty of its top professionals who are compensated as partners in the business in a way that aligns their long-term interests with those of shareholders and the bank".

SBC Warburg is now part of Swiss Bank Corporation, which announced a 29 per cent leap in total gross operating profits last year to $2.9bn.

Sport
Club legend Paul Scholes is scared United could disappear into 'the wilderness'
football
News
A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
science
News
Dawkins: 'There’s a very interesting reason why a prince could not turn into a frog – it's statistically too improbable'
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Travel
Dinosaurs Unleashed at the Eden Project
travel
Arts and Entertainment
music
Sport
football
Life and Style
This month marks the 20th anniversary of the first online sale
techDespite a host of other online auction sites and fierce competition from Amazon, eBay is still the most popular e-commerce site in the UK
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Quantitative Analyst (Financial Services, Graduate, SQL, VBA)

£45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...

Application Support Engineer (C++, .NET, VB, Perl, Bash, SQL)

Negotiable: Harrington Starr: Application Support Engineer (C++, .NET, VB, Per...

AIFMD Business Analyst / Consultant - Investment Management

£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home