The slumping pound is anticipated to make the terrible bonus round in 2016 appear a little less severe at U.S. investment banks in London, but for analysts in the City who have just been paid, Brexit has already provided a short-term boost.
Bonuses for analysts are down around 10% at U.S investment banks like J.P. Morgan and Bank of America Merrill Lynch and recruiters tell us that Jefferies has reduced its analyst bonus pool by the same amount – but juniors have still come out on top of 2015.
Compared to August last year, the pound is down by around 16% on the dollar, so juniors across the City have ended up with more in their pockets.
Jefferies pays its first year analysts £50k in London, its second year analysts £55k and its analyst three £62k. Bonuses comprise 75-80% of base, according to recruitment sources.
BAML, Credit Suisse, Deutsche Bank and J.P. Morgan all still pay their analyst bonuses in the summer. Goldman Sachs, Barclays, Morgan Stanley and UBS have all moved their analyst bonus payments to the winter cycle in line with other levels of seniority.
Jon Terry, partner and head of the compensation practice at PwC, says that all investment banks calculate their bonus pool in local currency, so most of these banks – even with a similar reduction in their analyst bonuses – will have benefited from the post-Brexit slump in sterling. The pound is down by 13.5% on the euro year on year, for example.
“These are not career changing decisions, but the currency fluctuations will undoubtedly help U.S. and European banks retain juniors at a time of changing in the industry,” he said. “UK banks’ American operations have the opposite problem, of course, and will need to think carefully about how they reward their employees if they wish to retain them.”
Junior investment banker have so far been sheltered from the predicted huge slump in bonuses for 2016. Johnson Associates, the compensation consultant, is expecting M&A bonuses to be down by up to 15%, and up to 25% for those in capital markets functions.
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