Bumper bonus time is back!
Oil is plunging, shares are tanking. But on Wall St and in the City, one thing is on bankers’ minds ...
JUST before dawn on New Year’s Day, when ordinary mortals were sleeping off their hangovers, a message pinged into the inboxes of hundreds of City bankers.
‘Your 2016 fee income to date is: zero. Your 2016 bonus to date is: zero’, it tersely informed the financiers, most of whom were with their families enjoying a brief respite.
That 5am missive was a not-so-subtle reminder that there is no rest for the Masters of the Universe.
Even as they luxuriated in an expensive ski chalet or lapped up the winter sun in St Barts, their employers were sending a stark message: Do Not Slack Off.
But before anyone is tempted to start feeling remotely sympathetic, this month also brings announcements of the bonuses for 2015 – and for some at least it has been another bumper year.
The full picture will not be clear for several months as disclosures trickle out across the world. But if the previous year is anything to go by, there will be plenty of largesse, despite nervy stock markets, the falling oil price and growth fears.
More than a thousand individuals at the big US banks in London’s Canary Wharf and the Square Mile became euro-millionaires – with pay packets of around £775,000 or more – in 2014, according to documents quietly lodged last year with City regulators (see table).
There were also around 190 euro-millionaires that year at Barclays, around 130 at HSBC and a hundred-plus at statebacked RBS, according to the filings. Precise numbers for Londonbased staff are impossible to obtain because European banks have to file worldwide figures and do not split them geographically.
SAFE to say, however, that a mere million euros would be pocket change to the very top earners, including one anonymous financier at Citibank who enjoyed between 10 and 11m euros, or £7.7m-£8.5m.
Big ‘rainmakers’, the men – and a handful of women who bring in major clients and deals – will again see cash showered on them like confetti, despite bids by European regulators and Bank of England governor Mark Carney to curb excess.
The generosity is hard to fathom for the average person – who has seen their pay at best stagnate over the past few years. At Morgan Stanley, pay and bonuses fell to $3.7bn (£2.6bn) from $5.1bn (£3.6bn) a year earlier, but there are still scores of people in its London offices who will be raking in large sums.
Goldman Sachs had its ‘ Bonus Day’ yesterday. The bank saw its fourth- quarter profits plunge by 65pc after it was forced to pay $5bn (£3.5bn) for mis- selling mortgage backed securities, but it had a bonanza year for M&A, advising on deals valued at more than $1trillion (£700bn) and outperforming every other bank in the world.
It paid out $12.68bn (£9bn) in pay and bonuses in 2015. In 2014 more than 260 people were paid at least a million euros and ten were paid more than 8m euros (£6m).
As with all the disclosures, no individuals are named and the best paid are likely to be traders no-one outside the bank has heard of. Among those who will have received an enviable sum, however, are Michael Sherwood and Richard Gnodde, cochief executives of Goldman Sachs International, along with Karen Cook, 61, one of the rare women at the top of investment banking.
The mother of six is known as the Queen of M&A and was last summer promoted to chairman of the investment banking division globally. She has worked on a string of deals including giving advice to BG Group, which is being taken over by oil giant Shell in a £36bn deal.
Mark Sorrell, one of media mogul Sir Martin’s sons, is another big cheese, who worked on last year’s £5.6bn merger between insurance giants Aviva and Friends Life.
Another likely big earner is Anthony Gutman, co-head of UK investment banking, a workaholic reputed to think nothing of having two client meetings before 8.30am.
‘Bonus day is eerily quiet,’ said one investment banker. ‘No-one wants to give away whether they are happy, not happy or resigning instantly.
‘The bosses are usually in glasswalled offices, so when they call someone in for “The Conversation”, everyone else is watching the body language, the facial expressions, even the way the envelope is slid across the table.’
Bonus pools have shrunk but it has been a bumper year for bids and deals. ‘ M&A was phenomenal last year,’ says commentator and Goldman Sachs alumna Louise Cooper. ‘The winners this year will be the smart, smarmy, smooth investment bankers who persuade CEOs to overbid on ridiculous transactions.’
This is all great news for the purveyors of luxury status symbols, such as John Collins, owner of rare Ferrari dealer Talacrest.
Business at his Ascot dealership has boomed, with 60 cars sold in the last financial year at a total cost of £113m. Luxury cars are attractive because of the poor returns on cash investments, he says.
David Lindsay, director of VIP sales at Watches of Switzerland and
BANKERS, he says, are obsessed with Spectre, the latest James Bond film, which has meant a spike in interest in Omega watches. Although bankers are not splashing out on new homes – possibly because of stamp duty increases – the growing trend is for basement excavations and extensions.
Top bankers also seem to take long-haul flights the way most of us catch the Number 9 bus. One went to South Africa for the weekend for the cricket. ‘It’s easy to fly out and be back at your desk on Monday morning. You could do it all the time,’ he mused, oblivious to the cost considerations that would rule it out for most people.
Insiders say bonuses now are only paid where warranted. ‘ One criticism is that people get paid whether they perform well or not but you are starting to see that change. If people are paid a disappointing amount they just have to suck it up... flouncing out is so last year,’ said one.
Revelations on this year’s bonuses come shortly after City regulator the Financial Conduct Authority made the controversial decision to drop a probe into the toxic culture and excess rewards at the banks.
‘It seems some people in the City can never lose, no matter what the economic conditions may be,’ said Stefan Stern, director of the High Pay Centre.
Although some in the City may feel the last two years were not vintage, many will feel outraged the gravy train is still chugging along.
Additional reporting by James Barton