Bankers are being warned that bonuses could plummet by almost 10 per cent as the annual salary-sweetener season kicks off, with zero-bonuses expected to make a comeback in 2016.
Investment bankers working in mergers and acquisitions and in fixed income, currency and commodities (Ficc) are most at risk of seeing their bonuses slashed, according to figures out today by salary benchmarking website Emolument.
The study, which pooled data from 3,407 City workers, showed that despite 2015 being a record-breaking year for M&A, a drop-off in the number of IPOs means bonuses may dry up.
Those working in an associate position could see their bonus cut by three per cent, falling to an average of £32,000 for 2016. Vice presidents could watch bonuses tumble five per cent to a predicted £76,000 next year.
However, Alice Leguay, co-founder of Emolument, told City A.M. that it could have been even worse were it not for megamergers in 2015, saying: “It’s a real fee-based business so fees have just been coming in massively on the back of those transactions.”
Leguay added that workers in M&A might find their bonuses syphoned off to fund underperforming divisions. “A bank can’t really afford to not pay an entire division so they usually use the bonus pool of one sector to fund another,” she said.
A shocking year for commodities means Ficc traders could see their bonuses drop nine per cent.
Emolument also said that 2016 could herald the return of the “doughnut”. As banks start to restrict their bonuses to star performers, an empty bonus packet could become commonplace for some and part of the reason for the fall in the overall average pool.
“Bonuses will be more polarised this year which means more zero bonuses in order to keep paying and satisfying some key staff,” said Leguay.
Conversely, bankers involved in trading equities could see their bonuses nudge upwards after a year of market turmoil. “Volatility is what traders look out for. That’s how they make money because they just need to buy at the right time and sell at the right point, so volatility is a godsend,” said Leguay.
Last week, chancellor George Osborne tore into the EU’s cap on bank bonuses, calling it “counterproductive”.