Investment bankers in line for bonus bonanza as income soars

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.

Click HERE to view graphic (135k jpg)

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" – the so-called rainmakers who generate the most fees – is deferred and paid in shares now mean that they have to wait to pocket the cash.

Bonus pools are typically based on a percentage of the fees generated by banks. The Thomson Reuters report covers the full spectrum of investment banking charges, which are generated for services such as advising on deals or underwriting share issues.

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.

The OFT also criticised companies, saying: "[They are] not focused on the cost of equity underwriting services, instead prioritising speed, confidentiality and a successful 'take-up'.

"Some may also lack regular experience of raising equity capital, which makes it difficult to hold investment banks to account on costs. While institutional shareholders have expressed concerns, they have yet to put sufficient pressure on companies to reduce the fees paid."

But the watchdog said it would not refer the issue to the Competition Commission and instead told shareholders and directors they should "drive competition for themselves".

News of rising bank fees will revive the debate about the City's bonuses culture. Brendan Barber, general-secretary of the Trades Union Congress, said yesterday: "The large increase in fees collected by UK banks show 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. A healthy banking sector should be encouraging business investment and growth, not just its own profits and bonus pools."

Investors' organisations were less concerned about the rise in fees, but said they were still worried about companies rushing into deals of questionable quality on the back of advice from investment banks. Michael McKersie, at the Association of British Insurers, said: "The big question for us is not the overall total amount of fees but whether they are commensurate with the quality of work undertaken. We need to know whether the right deals are really being done."

The money men doing the biggest deals in Europe

Viswas Raghavan

JP Morgan's head of international capital markets worked on the flotation of Italy's luxury goods giant Salvatore Ferragamo this year, as well as a €5bn rights issue by car maker Porsche. Hernan Cristerna, one of JPM's most senior M&A bankers, was also hugely productive in 2011.

Christian Meissner

Mr Meissner joined Bank of America Merrill Lynch last year to run investment banking for Europe, Africa and the Middle East, and has since been promoted to co-head of global corporate and investment banking. Under his watch BAML has worked on major deals including the Glencore IPO.

Franck Petitgas

A renowned art lover who is a trustee of the Tate, Mr Petitgas joined Morgan Stanley in 1993 from SG Warburg. The Frenchman has a background in equity capital markets and has bolsterd the company's mergers and acquisitions practice in Europe to one of the strongest in the industry.

Yoël Zaoui

Based in London, Mr Zaoui is global co-head of mergers and acquisitions in the investment banking division at Goldman Sachs, the company he joined in 1988. Mr Zaoui was born in Morocco and grew up in Rome, and he has overseen huge growth in the business's European revenues.

Stephan Leithner

Mr Leithner is the global co-head of investment banking coverage and advisory at Deutsche Bank and sits on Anshu Jain's executive committee. He is working on the Deutsche Börse merger with NYSE and Deutsche Telekom's proposed sale of T-Mobile in the US to AT&T.

Life and Style
A teenager boy wakes up.
life
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
Life and Style
food + drink
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
PROMOTED VIDEO
Life and Style
tech
Arts and Entertainment
A still from Duncan Campbell's hour-long film 'It for Others'
Turner Prize 2014
News
i100
Arts and Entertainment
Tony Hadley in a scene from ‘Soul Boys Of The Western World’
musicSpandau Ballet are back together - on stage and screen
Arts and Entertainment
From left to right: Ed Stoppard as Brian Epstein, Sheridan Smith as Cilla Black and Elliott Cowan as George Martin in 'Cilla'
tvCilla review: A poignant ending to mini-series
News
i100
Life and Style
Bearing up: Sebastian Flyte with his teddy Aloysius in Brideshead Revisited
lifePhilippa Perry explains why a third of students take a bear to uni
Arts and Entertainment
Sir Alan Sugar appearing in a shot from Apprentice which was used in a Cassette Boy mashup
artsA judge will rule if pieces are funny enough to be classed as parodies
News
ebooksAn unforgettable anthology of contemporary reportage
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

Trust Accountant - Kent

NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

Law Costs

Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

SQL Developer (Stored Procedures) - Hertfordshire/Middlesex

£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...

Day In a Page

Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

Isis an hour away from Baghdad -

and with no sign of Iraq army being able to make a successful counter-attack
Turner Prize 2014 is frustratingly timid

Turner Prize 2014 is frustratingly timid

The exhibition nods to rich and potentially brilliant ideas, but steps back
Last chance to see: Half the world’s animals have disappeared over the last 40 years

Last chance to see...

The Earth’s animal wildlife population has halved in 40 years
So here's why teenagers are always grumpy - and it's not what you think

Truth behind teens' grumpiness

Early school hours mess with their biological clocks
Why can no one stop hackers putting celebrities' private photos online?

Hacked photos: the third wave

Why can no one stop hackers putting celebrities' private photos online?
Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

Homegrown ballerina is on the rise

Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
Education, eduction, education? Our growing fascination with what really goes on in school

Education, education, education

TV documentaries filmed in classrooms are now a genre in their own right
It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

It’s perfectly reasonable to negotiate with villains like Isis

So why don’t we do it and save some lives?
This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

Is a sub-2-hour race now within sight?

Dennis Kimetto breaks marathon record
We shall not be moved, say Stratford's single parents fighting eviction

Inside the E15 'occupation'

We shall not be moved, say Stratford single parents
Air strikes alone will fail to stop Isis

Air strikes alone will fail to stop Isis

Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
Nadhim Zahawi: From a refugee on welfare to the heart of No 10

Nadhim Zahawi: From a refugee on welfare to the heart of No 10

The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
Witches: A history of misogyny

Witches: A history of misogyny

The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
Shona Rhimes interview: Meet the most powerful woman in US television

Meet the most powerful woman in US television

Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

Endangered communities photographed 'like Kate Moss'

Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style