The harsh, horrible truth regarding investment banking pay at RBS

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RBS's bonus pool has been leaked (allegedly). According the Sunday Times, bonuses at the bank will total £500m for 2013. RBS has issued a statement saying that the leak is premature and that it's made no decision about bonuses yet, but the figure is already fueling outrage as per the headline from today's Mirror below -

RBS fatcats

However, before anyone becomes too exercised about the generous pay being offered to investment bankers at RBS, they should look at the figures below. These are the average annual pay per head at the markets (investment banking) business.

2009: £174k

2010: £144k

2011: £141k

2012: £130k

2013: £108k (annualized, based upon pay in the first three quarters).

In other words, pay per head for investment bankers at RBS is on track to fall nearly 30% this year and has fallen by nearly 40% since 2009. Worse, the bank is rumoured to disproportionately reward a few top players in London and people at its Greenwich Capital Markets business in the U.S., leaving the rest to share the crumbs.

It helps explain why RBS bankers have been leaving for the likes of Nomura, which is reportedly one of the best payers in the City.

One headhunter who's been pulling people from RBS this year told us people are typically paid 30% less than the their counterparts at rival banks. RBS chairman Sir Philip Hampton recently divulged his disgust at one senior RBS banker who was earning £4m but claimed he could receive £6m elsewhere.

Another headhunter, speaking on condition of anonymity, said he works with RBS and that pay there isn't that bad. "RBS don't have the luxury of paying to attract people in the way that JPMorgan, Goldman and Citi do, but they do get close to market level for their top producers," he told us.

Simon Maughan, head of research at Olivetree Financial, said the situation may get worse for bankers at RBS as the next British election approaches in 2015: “Pay at RBS has been crushed in the past few years, but that’s not seen as newsworthy. RBS is being run according to a purely political agenda and that leaves people who work there in a difficult spot.

"You can hound them and hound them until eventually – like Hester – they will give up," added Maughan. "It would be easier if the government simply admitted that it doesn’t want the investment bank.”

RBS chief executive Ross McEwan is due to deliver the results to a strategic review of the bank's markets division in February. Poor pay may simply be a ruse to force exits and avoid redudnancy payments.

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