Why are banks delaying analyst bonuses?

In any normal year, junior bankers would know their bonuses by now - analyst payouts are usually announced in late June/early July.

This year, however, it hasn't happened.

According to recruiters dealing with analyst hires, bonus announcements have been delayed until August. This is confirmed by Dealbreaker, which claims Citigroup won't be announcing until August 15th.

Why the delay? Dealbreaker's source says it's because Citigroup wants to, 'do more intelligence on competitors and remain competitive.'

Recruiters agree. "In any normal year, most banks would have announced analyst bonuses by this stage, but this year no one wants to come out and announce first - only to find that they're 10-15% lower than everyone else," says one recruiter. "This is a very important year for junior pay - hiring has been strong [in M&A] and banks don't want people to leave for better paying competitors."

Matters are complicated by the fact that although junior M&A hiring has been strong in anticipation of an upturn, that upturn has yet to take place.

Year- to-date EMEA M&A volumes are roughly on a par with last year's poor activity levels and, according to Giuseppe Monarchi, head of EMEA M&A at Credit Suisse, it's "difficult to predict anything different for the remainder of the year, in view of the continued weakness in the equity markets and general uncertainty on the broader economic outlook."

The problem is therefore that banks would really like to pay analysts badly for 2010, but dare not do so in case one of their number pays well. Until one of them breaks cover and sets a market standard, no one's paying anything at all.