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Are We Ready for the Revival of the Investment Banker Bonus?

Bonuses for investment bankers should increase significantly this year, but that’s only if firms continue to follow their traditional compensation model and ignore calls to slash banker pay.

Driven by stronger-than-expected underwriting and advisory revenues, investment banks are putting together an understatedly solid 2013. Following an impressive May, revenues for the second quarter are expected to rise as much as 15% year-over-year.

Banker bonuses should increase along the same arc, between 10% and 20% for 2013, if banks determine compensation as a fixed percentage of investment banking revenue – usually between 40% and 50%, according to Mergers & Acquisitions. That’s a fairly big “if” though.

Public calls to slash banker pay have been met over the past two years, but the drop was mainly due to the poor performances of the banks amid economic uncertainty rather than some morally-driven decision by upper management. Now that revenues have rebounded, particularly in the U.S., banks will need to dole out bigger bonuses, likely meeting the wrath of shareholders and the general public, or redefine their compensation structures and feel the ire of their employees.

Who would have thought success could be so complicated?

Your Best Comments (eFinancialCareers)

Believe it or not, we do read your comments. Here are some of our recent favorites, along with the link to the original article.

Welcome to the Club (WSJ)

The latest member of Wall Street’s so-called "criminal club” is 49-year-old Victor Dosti, a former Whittier Trust employee who’s been accused of insider trading alongside several prominent portfolio managers at SAC Capital and Diamondback.

Look Busy (Business Insider)

The key to succeeding as a summer intern: making yourself look busy when you’re not. Some hints include reading sports and lifestyle articles on business-centric sites like Bloomberg and paying your bills at your desk. You’ll look like a pro.

No Miracle Workers (eFinancialCareers)

If utilized properly, headhunters can do some great things for your career. Their power is limited, though. Don’t expect them to work these miracles.

Beefing Up Overseas (Financial Times)

New York’s Warburg Pincus is headed across the pond in an effort to take advantage of lenders seeking to shrink their balance sheets. The private equity firm is building a new London-based team headed by Daniel Zilberman, who is reportedly looking to add as many as five investment professionals in the coming months.

PIPs are the New Thing (Financial News)

Sick of paying out redundancy packages, banks have begun employing “performance improvement plans,” which allow firms to cut staff without inking a financial agreement with the employee.

Buzz Around the Office

So Much for Modesty (HuffPo)

Prince Alwaleed bin Talal is investing part of his enormous fortune to make people fully aware of the size of his enormous fortune. The Saudi Prince is suing Forbes magazine for underestimating his wealth on their annual rich list.

List of the Day: Keeping Your Cool

Everyone gets upset at work from time to time. When it happens to you, do this.

  1. Remember that it’s business, not personal.
  2. Ask yourself: how important is this really?
  3. Remind yourself about the reasons you love your job.

(Source: The Daily Muse)

AUTHORBeecher Tuttle US Editor

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