Last time we looked at the state of salaries in investment banks, it was 2010 (hence the ancient comments at the bottom of this article, which is an updated version of that piece.) Back then, the European Union hadn’t capped bonuses and banks mostly hadn’t introduced ‘cash allowances’ as a method of circumventing the EU rules. Nearly five years on, banking pay has become far more complex and far more varied, both between and within banks.
Emolument’s estimations of salaries in the City of London, 2014
Emolument.com, the salary benchmarking company, provides snapshots of average salaries across banks in London. They calculate that average salaries for front office bankers (M&A and advisory bankers and sales and trading professionals) in the City are currently as follows:
Analyst average salaries: £51k
Associate average salaries: £77k
Vice President (VP) average salaries: £116k
Director average salaries: £171k
Managing Director (MD) average salaries: £229k
Are Emolument’s figures too low though?
We spoke to six different headhunters in the City, each of whom agreed to provide us with information on a strictly off the record basis. They argued that, for many banks, Emolument’s figures seem to understate the reality.
We were told that:
- Analyst salaries range from £45k to £65k. (First year analysts typically receive £45k. Second year analysts get £50k to £55k. Third year analysts get £60 to £65k.)
- Associate salaries have just been hiked and now range from £90k to £130k. (First year associates get £90k. Second year associates get £95k to £100k. Third year associates get £100k to £130k). £130k is clearly high for a third year associate, but M&A headhunters in London say Morgan Stanley has just increased its third year associate salaries to this level. This has not been confirmed by the bank.
- VP salaries range from £120k to £150k. VP salaries used to be restricted to £120k to £130k, but Morgan Stanley has allegedly raised the bar.
- Director’s salaries range from £160k to £200k.
- Managing director’s salaries usually range from £200k to £350k, but can be a lot higher.
Goldman Sachs, JPMorgan, Morgan Stanley, Credit Suisse: highest salaries at analyst and associate level
London-based recruiters say that Goldman, JPM, Morgan Stanley and Credit Suisse offer the highest salaries to their junior bankers. Their pay is at the top end of the ranges given above.
By comparison, Citigroup, Nomura, Bank of America, Barclays and UBS are said to rank in the middle for junior bankers’ salaries. And the French and Canadian banks (BNP Paribas, SocGen and RBC) are said to rank towards the bottom, along with RBS.
U.S. houses and Nomura: highest salaries at vice president, director and managing director level
If you want to earn a salary towards the top of the ranges given above at VP, director, or MD level, American houses are reportedly the place to be. So too is Nomura, which has a reputation for paying its senior bankers very well. Deutsche Bank has hiked salaries for its regulated staff, but headhunters say salaries at the German bank are variable and not always on a par with US rivals.
While headhunters say banks like Goldman Sachs will pay their most valued managing directors salaries as high as £600k, French banks like BNP Paribas are said to more commonly pay MD salaries of £230k to £260k, although some senior MDs at the French bank are said to be on salaries of £300k. Swiss banks (UBS and Credit Suisse) are said to fall within the middle tier of payers.
The fixed allowance phenomenon
No discussion of banking salaries now would be complete without a comment on the fixed allowances banks pay to their ‘code staff’ to avoid the European Union’s decree that bonuses for 2014 cannot be more than 2x fixed pay.
One debt capital markets headhunter said banks are now in the process of adjusting salaries and fixed allowances for senior staff on a person-by-person basis. He claims that banks are deriving individual salaries and fixed allowances from estimates of how much individuals should earn in total for 2014. For example, if a senior banker is to be paid £1.2m and the European Union’s bonus rule is to be adhered to, the combination of salary and fixed allowance must total £400k. These calculations are driving wide disparities in salaries, he alleged.
Bonuses cannot be discounted either. While Morgan Stanley has become one of the most generous banks in terms of salaries, headhunters say it falls within the bottom tier when it comes to total compensation because bonuses at the U.S. bank are often poor. Our research last week suggested that total compensation per head at Morgan Stanley in London was half that at Goldman Sachs in 2013.
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