Bonus cheer for favoured few
Corporate financiers and structured product specialists will overflow with bonhomie. Interest rate sales teams will contain more than their fair share of scrooges. And there will be disappointed faces all round.
These are among the predictions of the Armstrong International bonus report. The latest of its ilk, Armstrong's report is based on conversations with employees at 30 banks in London. It predicts the total bonus pool will be up anywhere from 10% to 30% on 2005.
But Matthew Osborne, a partner at Armstrong, says plenty of people will be surprised to find they're being paid the same or less. "A lot of people have made the same money they made in 2005 and are expecting to be up 10-30%. They could be paid flat or down."
With no one knowing where markets will go next, Osborne says more effort than ever will be made to focus rewards on top performers: "Banks are determined to secure their best talent now - if there's a slowdown towards the end of next year they know they need to have the best guys on board."
Corporate financiers and structured product specialists are likely to do best, simply because of the strength of those markets, says Osborne. For example, top performing structured credit traders are forecast to take home US$2m (1.1m) to US$3m, particularly in high margin products such as constant proportion portfolio insurance (CPPI), hybrid products and collateralized debt obligations of asset backed securities.
If tears are to be shed, Armstrong's study suggests they'll flow among mid-ranking people in teams selling interest rate products to hedge funds. Although associates in the area are likely to be paid up, it predicts VP level staff in interest rate teams could see pay down 20%. And if things don't buck up next year they may be reassigned elsewhere.
Armstrong International's 2006 Bonus Report:
Structured Credit
Correlation credit traders: US$1m+
Junior structurers: US$700k
Debt Capital Markets
Director-level originators: US$500k-US$1m
Managing directors (without significant management responsibility) US$1.2m-US$1.5m
Interest Rate Derivative Sales to Hedge Funds
Managing directors: US$2m-US$3m
Vice presidents: US$500k-US$1.5m
Equity Research
Top managing directors US$1m+
Directors: US$700k
Vice presidents: US$500k
Corporate Finance
Managing directors: US$1m-US$3m
Directors: US$1.5m for outperformers, US$1.2m-US$1.3m for the rest
· Source: Armstrong International
