UK bank adviser pay catching up with traders

By Daniel Schäfer in London. This article originally appeared on the Financial Times website, on September 16th, 2014

Senior advisory bankers’ pay in London has risen almost on to a par with traditionally higher-earning traders, underlining the shifting fortunes of these distinct businesses within investment banks.

UK-based managing directors working on deals and capital raisings have seen total pay rise by a fifth to an average of £586,000 last year, according to data compiled for the Financial Times by Emolument, a pay comparison group.

By contrast, senior traders have suffered an average 13 per cent cut to £602,000 after a sharp drop in bonuses, the self-reported numbers from hundreds of staff at 10 European and US investment banks show.

It puts a spotlight on the resurgent clout of advisory bankers, after a dearth of dealmaking in the wake of the financial crisis placed them squarely in the shadows of profit-churning bond traders.

A sharp increase in takeovers as well as debt and equity issuance by companies and other clients since last year has reversed the fortunes of corporate financiers.

At the same time, their colleagues on trading floors have seen profit opportunities squeezed by tighter regulation, lower trading volatility, a ban on proprietary trading, the move towards electronic trading and several manipulation scandals.

“Traditionally, bankers on the global markets side have been paid more but these are tough times in fixed income,” said William de Quetteville, partner at Armstrong International, an executive search company.

Trading revenues at the largest investment banks globally have fallen 13 per cent in fixed income, currencies and commodities annually in the first half of this year alone, according to data compiled by Coalition, a research firm.

By contrast, revenues from advising on deals and underwriting debt and equity issuance have risen 11 per cent in the first six months, fuelled by a resurgence in large takeovers and a flurry of initial public offerings.

The near-equalisation of pay is also a reflection of the rising demand for advisory bankers at a time when many investment banks are still laying off traders.

Banks including BarclaysCitigroupUBS and Nomura have been selectively hiring senior advisory bankers, while fast-growing boutique investment banks have also lured away top talent.

Barclays brought 13 managing directors into the advisory unit in the second quarter, Tom King, the investment bank’s chief executive said last week. But the UK lender has so far this year slashed 2,700 investment banking jobs – mainly in the trading businesses.

Senior bankers say fixed-income traders in particular will continue to face job and pay uncertainty, given the structural challenges in the sector.

These include capital rules that have made certain trades uneconomic, the abolition of trading on banks’ own accounts and the slow but accelerating replacement of traders with machines.

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