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.

Start your day with The Independent, sign up for daily news emails
Sport
The Queen and the letter sent to Charlie
football
News
Manchester city skyline as seen from Oldham above the streets of terraced houses in North West England on 7 April 2015.
news
Arts and Entertainment
Eurovision Song Contest 2015
EurovisionGoogle marks the 2015 show
News
Liz Kendall played a key role in the introduction of the smoking ban
newsLiz Kendall: profile
Life and Style
techPatent specifies 'anthropomorphic device' to control media devices
Voices
The PM proposed 'commonsense restrictions' on migrant benefits
voicesAndrew Grice: Prime Minister can talk 'one nation Conservatism' but putting it into action will be tougher
News
Two lesbians hold hands at a gay pride parade.
peopleIrish journalist shares moving story on day of referendum
News
Ireland will not find out whether gay couples have won the right to marry until Saturday afternoon
news
News
Kim Jong-un's brother Kim Jong-chol
news
News
i100
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?
Season's finale brings the end of an era for top coaches and players across the continent

The end of an era across the continent

It's time to say farewell to Klopp, Clement, Casillas and Xavi this weekend as they move on to pastures new, reports Pete Jenson
Bin Laden documents released: Papers reveal his obsession with attacking the US and how his failure to keep up with modern jihad led to Isis

'Focus on killing American people'

Released Bin Laden documents reveal obsession with attacking United States
Life hacks: The innovations of volunteers and medical workers are helping Medécins Sans Frontières save people around the world

Medécins Sans Frontières's life hacks

The innovations of volunteers and medical workers around the world are helping the charity save people
Ireland's same-sex marriage vote: As date looms, the Irish ask - how would God vote?

Same-sex marriage

As date looms, the Irish ask - how would God vote?
The underworld is going freelance: Why The Godfather's Mafia model is no longer viable

The Mafia is going freelance

Why the underworld model depicted in The Godfather is no longer viable