Wall Street banks lead bonus charge as European lenders set to row back on mega payouts

New York May Fall Behind Other Cities As World Financial Capital
Wall Street's banking groups are gearing up to take the lion's share of payouts this year (Source: Getty)

Top dealmakers at Wall Street’s banking titans are expected to take home the lion’s share of this year’s payouts as the split between bonus season winners and losers becomes more pronounced.

Next week, the bonus season will kick off in earnest when Wall Street heavyweights JP Morgan and Bank of America report full-year results.

“US banks continue to be more aggressive when it comes to paying bonuses versus European banks,” Alice Leguay, co-founder of salary benchmarking website Emolument, told City A.M. “It is a cultural factor – to strongly incentivise employees – as well as due to the simple fact that they tend to bring in more fees and are therefore able to spend more on their bonus pool.”

Read more: Deutsche Bank mulls axing bonuses to pay loans fine

Banks that have worked on block-buster mergers and acquisitions (M&A) will have raked in fees substantial enough to bolster their bonus pools.

Yesterday, it emerged that investment banking fees globally totalled $85bn (£69bn) last year. However, this was seven per cent down on the previous year according to Thomson Reuters. In the UK and Ireland, the slide was 14 per cent, with banks pulling in fees of $5.5bn.

Banks headquartered in the UK are also limited as to how much they can pour into their bonus pots due to financial penalties they are paying, or still face, for past mis-selling offences. In addition, the amount rewarded by British banks is being curbed as calls grow for pay restraint in the City.

Read more: These are the average London banker bonuses in 2016 (they're not happy)

Hakan Enver of Morgan McKinley said: “The high earners are a very small percentage of individuals and generally they are the ones who bring in business.”

Payouts are expected to become increasingly polarised, both within organisations and between City workers whose employer is headquartered in the UK or elsewhere in Europe, and their counterparts at Wall Street institutions.

Read more: Bankers went bonkers for bonuses last year

Many bankers at European lenders can expect a glum start to the year, with the number of so-called “doughnuts” – meaning a bonus of £0 – expected to rise.

Jon Terry, partner at PwC, said there was “no question” there would be more doughnuts, and very low bonuses on the back of shallower bonus pools.

Read more: The UK’s bonus system among the world’s most unfair - CIMA

He said: “In order to pay the people who have performed well this year, they have to pay low or zero bonuses [to others].”

Figures from Emolument show that 13 per cent of bankers were handed a doughnut in 2016, compared with just seven per cent in 2015.

Related articles