Robert Fleming, the merchant bank, added its voice yesterday to critics of Deutche Morgan Grenfell's aggressive recruiting policy in the City, which has been widely blamed for driving up salaries and bonuses.
John Manser, chief executive of Flemings, said Deutsche's policy was "rather extraordinary," but added that the damage was not to the City as a whole but "maybe in the long term" to Deutsche Morgan Grenfell itself. "There is always someone who wants to expand in a hurry," he said.
Mr Manser said his bank had been able to resist the pressure and its salaries, and bonus payments were not out of line with past experience.
Reporting profits before tax at Robert Fleming down to pounds 133.5m from pounds 171.9m last year, Mr Manser said the bank's overall costs, two-thirds of which were to pay for staff, had risen 11 per cent. But this was after a 5 per cent increase in staff as the bank expanded. Staff numbers have risen from 4,200 to 7,200 in three years and new offices have been opened in 16 countries. Flemings has also entered new businesses areas and invested heavily in expanding its equity research and dealing operations.
Mr Manser said: "All this has been expensive. The cost of opening new offices, recruitment and training is high. Inevitably costs rise in advance of earnings and this has been reflected in two years of falling profits."
But the period of maximum investment strain was over and the company was reaping the rewards. Profits in the last three months were substantially higher than a year earlier.