Strong ECM bonuses not a sure thing

It was all going so well. But after a storming start to the year, bonus prospects for equity capital markets professionals have taken a distinct turn for the worse.

In the short interlude since last Thursday, the world's leading equity markets have undergone something of a battering, with the UK's FTSE 100, the US Dow Jones, and regional markets in Latin America and Hungary all falling significantly.

In the wake of the reductions, recruiters say bonuses for equity capital markets pros are suddenly looking less fulsome than they might otherwise have been.

"It was looking like an extremely good year for ECM bonuses," says David Carrier, a director at search firm Kinsey Allen. "Now that's a little less certain."

"It's obviously very early days but the primary markets people are most likely to suffer from recent market weakness and the potential downturn ," says Simon Vaughan Edwards, a director at search firm Alexander Mann Global Markets. "Until now, business performance and subsequent hiring has been up. But sentiment could be about to change."

Rising stock markets offered a shot in the arm to beleagured ECM specialists. Following the strongest bull run since the 1950s, in which the FTSE 100 rose more than 80% from its low of March 2003, companies rushed to list on the London Stock Exchange. In the first quarter of this year, the value of companies listing on UK markets rose 300% versus the first quarter of 2005.

Recruiters say falling stock markets could now dampen enthusiasm for equity offerings and the bankers who arrange them, particularly as pundits suggest this is more than just a passing trend.

The Telegraph at the weekend quoted Teun Draaisma, head of European equity strategy at Morgan Stanley, as saying markets are due a correction: "The dollar is very, very weak, inflation risk is rising rapidly due to commodity prices and there are a lot of growth risks as well," he said.

However, recruiters say recent weaknesses have yet to stifle ECM recruitment. "Demand for ECM people remains very strong, particularly at the junior level," says Carrier. "Banks are still looking to make key ECM hires for the remainder of this year."