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Who will get paid? And who won’t?

14 November 2007

eFinancialCareers UK

Headhunters Armstrong International and Options Group have both now unveiled their forecasts for 2007 bonuses. They’re not entirely in agreement.

The top line

…is that bonuses will be down, down, down. According to Armstrong’s report (which we haven’t actually seen, but which is plastered all over the press this morning), the average banker will see his/her payout decline 20%. It predicts a higher proportion will be in shares, with UBS now said to be paying anything above $750k in stock.

Options Group is more upbeat, but remains downbeat – it says 2007 bonuses will fall 5-10%.

Almost certainly bigger bonuses for…

• Commodities pros – an increase of up to 20% (according to Armstrong via the Financial Times), and 15-20% according to Options Group.

• Wealth managers – either flat or an increase of up to 10% (according to Armstrong via the Telegraph). No predictions from Options, but we side with Armstrong here.

Almost definitely smaller bonuses for…

• Securitisation pros – down 10-30%, says Armstrong. MBS types will see a decline of 30-35%, says Options Group.

• Leveraged financiers – down 30-35%, says Armstrong. No predictions from Options Group, but what with all those write-downs, even a 30-35% cut looks generous.

• Fixed income in general – down 30%, says Armstrong. Down 15-20%, says Options Group.

No agreement on…

• Equities in general – the average bonus across the piece in equities will be up 10-15% according to Options Group. Armstrong’s predicting they’ll be flat to down 10%.

• Investment bankers – up 10-15% according to Options Group. Down 10-15% according to Armstrong.

Comments (11)

That the global bonus pool is down this year is beyond doubt. We estimate it is up 10% in the M.E, flat in Asia, -15% in Europe and -30% in the US (excl. cable hike).

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Comments (11)

  • This topic of bankers' bonuses has become way over the top and popularised in recent years. Articles appearing everywhere, as if 20% up or down in bankers' bonuses can determine the fortunes of an entire economy, the rising or fall of house prices, the Central Bank monetary policy etc... what I really dislike is the vicious tone of most of these articles

    Anon, Fixed Income 14 Nov 2007

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  • these guys are all making the number up...they haven't got a clue! What are they psychic? Even bankers don't know the magnitude of the bonuses...

    Anonymous 14 Nov 2007

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  • If lots of these bankers dont get big enough bonuses they might turn to a life of crime, money laundering and illict activities. its happened before. US subprime anyone?

    Dr Evil and Mini-Me 14 Nov 2007

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  • Ignore these sensationalist reports - remember that bonuses are paid to persons in investment banking based on whole well the firm does as a whole over the entire year as well as whole well the region/division/dept that the person works in has done - we are working numbers now and most pools are higher, some are the same with a few lower - mgmt are not stupid - they know that if they dont pay high performers then they will leave for the competition - so if your dept/division has done well YTD (which most have done with exception of MBA/CDO desks) and you get a high rating then expect a positive result year end

    Anon 15 Nov 2007

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  • I run Options Group's compensation consulting practice and i just wanted to add that the press often simplifies our findings. Our report is 150-pages long and breaks bonus projections down by product and by region globally. And yes, they are just projections so HR heads can estimate headcount and payouts going forward. We never said they were anything but. Happy to discuss this with anyone in more detail off-line. Serious inquiries only please.

    Eric 15 Nov 2007

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  • Question for Eric, I'm moving to Hong Kong in an equity derivatives research role at Associate level. What shoul I expect as basic and bonus?

    Anonymous 15 Nov 2007

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  • I have read an Options Group survey in full before and thought it was very biased to the US market, but inaccurate with respect to the UK. Having helped compile a few myself over the years, I regard these surveys with healthy scepticism, please dont treat them as gospel.

    Senior headhunter 15 Nov 2007

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  • Our company produces an annual survey post bonus. We start collating data around the end of November. This year is going to be harder than ever to give breakdowns either between the tiers or the asset class or the function. Why? Because of the vast differentials in RoE between the banks and the collapse of the dollar (in which many awards are made, hedging aside). Generalisations are generally wrong but surveys serve as a useful guide nevertheless as substantiated by client demand. Given such unprecedented disparity, it is impossible at this stage to give a figure that will be accurate to all. We are seeing areas in some banks likely to enjoy rises of as much as 40% whilst others will be fortunate to have a job let alone a bonus; so effectively a 100% down. That's one hell of a spread that could apply to two divisions of the same bank alone! That the global bonus pool is down this year is beyond doubt. We estimate it is up 10% in the M.E, flat in Asia, -15% in Europe and -30% in the US (excl. cable hike).

    Headhunters produce this data because clients want it. So stop shooting the messenger.

    Another Senior Headhuner 16 Nov 2007

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  • we'll all get paid a mint

    Barry OC 16 Nov 2007

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  • Anonymous, Derivatives: goto our web site and give us a call

    Eric Options Group 16 Nov 2007

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