Derivatives dealers buck the City trend with pay bonanzas of more than £1m

The mood may be despondent in some quarters of the City, but bankers who work in the most complex areas of derivatives have been celebrating thanks to pay bonanzas of more than £1m, according to a survey published today.

Napier Scott, a City recruitment company, said bankers' pay was down by about 15 per cent on average in the current bonus season. But it has been a time for cracking open the champagne for those who work in credit derivatives and other instruments which allow investors to hedge against the downturn in equity values.

Shaun Springer, the chief executive of Napier Scott, said the rush by banks to boost their staff in these areas had inflated pay packages and made it difficult for smaller institutions to attract talent. "It is the biggest growth area for banks at the moment. The credit derivative band wagon gathered pace during 2002, with second and third-tier banks struggling to fill a growing number of vacancies as the market expanded," Mr Springer said.

Napier Scott's survey found some UK managing directors responsible for synthetic structuring, products similar to derivatives, at the so-called bulge bracket of investment banks have received remuneration of £125,000 in basic salary and £1.125m in bonuses.

One banker who has worked recently in this area at a major bank said: "Everyone has focused on the doom and gloom, but we have been making some tidy sums. But you won't get anyone to talk about it publicly because they would be sacked."

The trend is in sharp contrast to other banking divisions, where headcounts have been on a downwards trajectory. Banks have made particularly savage cuts in equity sales and research and corporate finance, where business has dried up in the last three years of grim stock market conditions.

Napier Scott's study found bankers working in specialised derivatives and debt structuring who are based in Asia were paid up to 15 per cent more than those in the US, due to the difficulty of recruiting individuals with the expertise to do the job.

The top tier of bankers in the Far East in synthetic structuring have taken home an average of £140,000 in basic salary and £1.12m in bonuses.

The survey said that these areas of exotic derivatives aside, banks' general recruitment policy would remain very tight in 2003, with hiring levels for the year down 75 per cent compared with 2002's already reduced levels.