Harsher reality for analysts and associates?

Payday is fast approaching for analysts and associates. Will this be the first year for a while that junior bankers are left high and dry?

If yesterday's comments from John Whitehead, a retired co-chairman of Goldman Sachs, are anything to go by, it may well be. Whitehead told Bloomberg that investment banking compensation has reached "shocking" proportions and advised securities firms to curb bonuses - even if employees quit for better-paying hedge funds as a result.

Whitehead's comments were directed at the industry's highest earners, rather than banking juniors. But the sentiment doesn't augur well for analysts and associates, whose bonuses are typically announced in May and June. Like senior colleagues, they've done well in recent years - bonuses paid to second and third-year analysts in corporate finance have tripled since 2005, according to recruitment firm Morgan McKinley.

Will pay rise again? A salary survey from recruitment firm EM Financial, which takes into consideration expectations of the approaching payouts, suggests corporate finance juniors definitely think it will. This time last year, the survey says, first-year analysts were anticipating bonuses of up to 35% of salary; this year the upper limit is expected to hit 100%.

EM Financial managing director David Howell predicts bonuses will be nudged higher by banks' need to prevent juniors defecting to hedge funds and private equity. Adam Cairns, a director at recruiter Fennemore Banks, is also optimistic: "M&A pipelines are still full and banks are well aware of the problems they'll face if they lose numbers of people in July and August due to paying inadequate bonuses."

But Cairns also says banks are apprehensive about the possibility of a downturn in M&A in 2008 and junior bankers are increasingly cautious about moving. As a result, he predicts any increases in analyst and associate bonuses this year will be reserved for top performers.

2007 salary and bonus expectations: corporate finance

1st year analyst: Salary 35k to 41k; Bonus 50% to 100%

2nd year analyst: Salary 41k to 46k; Bonus 60% to 110%

3rd year analyst: Salary 45k to 50k; Bonus 80% to 150%

1st year associate: Salary 55k to 60k; Bonus 100% to 180%

2nd year associate: Salary 58k to 64k; Bonus 100% to 200%

3rd year associate: Salary 60k to 70k; Bonus 150% to 250%

· Source: EM Finance