Junior investment bankers may get hefty bonus, but seniors face a cut

MUMBAI: Annual bonuses for investment banking rain makers could be a mixed bag this year— junior executives may be paid as much as a fifth more than last year or twice their fixed compensation but seniors could face a cut with revenue and the rupee having tumbled, recruiters said. Global investment banks start paying out bonuses in January.

"Overall revenue is down as compared to last year," said the managing director of a global investment bank. "Though the deal market is showing recovery, compensations will be in line with revenue." None of the top 11 global investment banks ET spoke to would comment on bonuses and compensation for 2014.

But head hunters said junior bankers from analysts to vice presidents will be rewarded better, mostly through payments deferred over the year or in stock, in line with trends since 2009.

"Bonuses at the mid to junior level will be at par or relatively higher as compared to last year," said Sonali Puri Manek, investment banking head at Vito India, a local executive search firm specialising in financial services.

"However, at director and managing director level, the numbers will show a wide range across houses and is completely linked to the revenue generated by an individual banker." At junior levels, bonuses will range from 100% to 200% of fixed compensation, according to a study by Vito India released on Tuesday.

"Bonuses are a factor of individual and global corporate performance, potential of the individual and sector the banker operates in," said Puneet Pratap Singh, partner in charge, New Delhi, Heidrick & Struggles, a global headhunting firm. "We expect bonuses to be higher by 10-15% this year. Investment banking activity has picked up considerably and banks need to motivate and retain talent this time."
Investment banking revenue from the equity and debt capital markets and mergers and acquisitions (M&A) is down more than 12% this year at $348.5 million, according to data compiled by Dealogic Plc., an investment banking data provider. The rupee has weakened 2.23% to 63.29 per dollar from 61.91 on January 1.

"The overall M&A business has been down as compared to last year," said Amitabh Malhotra, managing director, NM Rothshild India, a global investment bank. "Though a full-service bank will have other revenue streams, those too have been down… Bonus is a matter of not just an individual’s performance but also the firm's and hence one can expect lower payouts this year," he added.

That suggests million-dollar bonuses may not be too forthcoming for seniors, across the industry. But with a stable government at the Centre trying to revive the slowing economy, more companies could tap the capital market as cash-starved companies try to trim debt, bankers said. This could also lead to a rise in M&A activity pushing banks to expand, which would lead to an increase in hiring at local and global institutions.

Indian companies raised a total $11.3 billion through 134 equity deals this year compared with $9.98 billion in 2013 through159 deals, Deal Logic data showed. Total equity revenue fees rose to $79.7 million from $57.7 million in calendar 2014. "We see increased hiring trends at most global houses to strengthen the execution pool," Manek of Vito India said.

"Multiple clients are also talking to equity capital markets heads for a 2015 intake, with a surge in capital market activity expected. Coverage talent in sectors like infra, industrials, consumer will see musical chairs in early Q1 2015." Vito India's annual report on hiring and compensations trends in 2015 highlighted that after continuously cutting down in the last few years, global banks are now "approving India headcounts positively".