Salary survey: Debt origination bonuses dispel gloom

Debt origination and credit derivatives are among the few bright spots in an investment banking pay survey by Longbridge, the search firm.

Bonuses in both areas rose last year while they fell in other sectors, including cash equities, equity derivatives and credit research.

Managing directors in debt origination pulled in bonuses of between 110% and 780% of salary in London, up from 110% to 700% the year before. With typical basic salaries of 150,000 (€218,000) in bulge bracket banks, a large number of staff were on packages of more than 1m.

Longbridge said banks were looking for debt origination staff with expertise in the German and Italian markets. Demand for experts in Central and Eastern Europe was also picking up. Longbridge said: 'The interest in former communist countries is at its highest for five years, especially government debt.'

He said there was a battle under way between banks to find the most successful model for debt origination. Those with large balance sheets were hoping the appeal of a one-stop shop would prevail, while some smaller ones had merged their debt and equity markets teams.

In credit derivatives, managing directors at top-tier banks earned salaries of 140,000, with bonuses ranging between 230% and 460%, slightly higher than in 2001.

Longbridge said: 'Demand for credit derivatives professionals will remain high in 2003. We expect strong demand for senior structurers with a good understanding of synthetic collateralised debt obligations.' Structurers for hedge fund collateralised fund obligations are also needed.

Credit research was among the areas where bonuses fell sharply - from 60,000 to 125,000 for directors in 2001 to 50,000 to 100,000 in 2002. Longbridge said few firms were hiring analysts, but there was demand for asset-backed securities experts and ratings advisory specialists.

In European cash equities, staff at all levels received zero bonuses last year, the survey said. The year before almost all senior staff got a bonus of at least 50% of salary.

Longbridge said its survey analysed the pay of more than 1,000 bank staff. It predicted that across all sectors, many smaller firms would struggle as the economic downturn continues. 'Second and third-tier firms will find it increasingly difficult to compete in volume,' the firm said.