Investment bankers toast the return of the bumper bonus season

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The Independent Online

After two years of cutbacks and redundancies, investment bankers can look forward to a 10 to 20 per cent increase in their bonuses this year, according to a survey published today.

The survey, by the recruitment consultants Armstrong International, marks a return of confidence in the City. Middle-ranking executives in investment banks are now being rewarded with bonus rises of up to 20 per cent after a return of stability in the stock market. Bonuses fell by an average of 30 per cent in 2002 and 40 per cent in 2001. Aidan Kennedy, partner at Armstrong, said: "There is now a cautious optimism with bonus payments. People have gone through so many redundancies, pay freezes and cost cuttings, that the top management is now aware that it must reward them this year and send out a more positive message. Cost trimmings are now coming in other places, such as expenses accounts for entertaining."

Research into the expected pay rewards for 2003 at 11 investment banks, including Citigroup, JP Morgan, Lehman Brothers, Merrill Lynch and Credit Suisse First Boston, found that the rapid rise of hedge funds as a client group had contributed to the highest rewards. Those working in credit derivative teams can expect awards to rise up to 50 per cent and some in equity derivatives trading will see bonuses double. Interest rate trading has also been highly lucrative - some managing directors can expect to pocket more than £3m.

The survey also proclaims the death of the "star analyst" after the tightening up of regulations between research and investment banking within the same company. Mr Kennedy said analysts were now subject to much tougher performance assessments, and only a handful could expect to receive more than £600,000 as a bonus.

Investment banks have cut thousands of jobs in the past couple of years as crumbling markets crippled their revenues, but the survey found that the bulk of redundancies were now over. It predicts that recruitment in credit, interest rate and equity derivative areas will continue well into 2004.

Adding to evidence of an upturn in fortunes in the City of London, figures published yesterday showed the volume of merger and acquisition activity accelerated over the summer.

Takeovers of UK companies totalled £7.3bn in the three months to September, a 23 per cent increase from the £5.9bn recorded in the previous quarter, the Office for National Statistics said.