LONDON, Aug 5 - Europe's banks are stashing cash to pay bumper bonuses to top performers amid a deal frenzy driven by pent up demand from COVID - 19 pandemic and rebounding bank profits.
Banks have added billions of dollars to bonus pools as they attempt to repay restless employees they will be rewarded in 2021 after a lean 2020?
The planned payouts are more modest than the bonuses bonanza on Wall Street, but international banks nonetheless risk a public backlash at a time when many businesses and individuals are still struggling with the pandemic, advocacy groups for fair pay said.
Britain-based Barclays increased its bonus pool by 46% to 1.1 billion pounds up from 749 million pounds a year earlier, while HSBC topped its bonus pool by $900 million in the first half.
Standard Chartered said a normalisation of performance-related pay during the first half drove an 8% jump in costs, to $5.1 billion.
Senior bank executives and recruiters said the market is the most competitive they have seen in a decade, as rebounding economies worldwide, pent-up demand and the fad for investing via special purpose acquisition corporations drives dealmaking activity.
The Swiss bank UBS increased pay for its financial advisers by $242 million in the second quarter after booking higher revenues, while Deutsche Bank upped pay and benefits in its investment bank by 6% compared with the same period a year ago.
His pay and bonuses will likely increase in the second half of the year, says Sophie Scholes, head of the UK Financial Services practice at Headhunters Heidrick Struggles.
Banks are anticipating that the next bonus round will be one where they need to pay out, driven by two factors, she said.
One is the sheer competition for talent, and that means recruiting good people, and two is that because of all the market activity people have a good pipeline and some good wins behind them, and banks are trying to prepare for that.
The trend is global, Scholes said, with banks in Europe and Asia playing catch-up to the United States.
Goldman Sachs increased his compensation on the preceding year by $3.5 billion, while JPMorgan gained $2 billion.
Goldman raised the junior base pay to $110,000 after rivals like Morgan Stanley and JPMorgan increased their first year pay.
This is prompting European rivals to follow suit, with HSBC this week telling staff it would pay new analysts at its U.S. investment bank $100,000 a year.
The U.S. is remarkable in terms of activity, which comes from their economic recovery being seen as more robust, and it has always been a very acquisitive market in terms of talent, Scholes said.
While big payouts are back, in Britain regulations that cap payouts at twice the level of base pay and concerns about public perception of banker bonuses during a global crisis mean lenders are showing some restraint.
Paying out huge bonuses at a time when businesses and households are struggling and the economic outlook remains so uncertain is not only financially irresponsible, but morally dubious, said Simon Youel, head of policy and advocacy at Positive Money.
Youel said much of banks' recent profitability could be traced to state support measures for the economy. British newspapers have suggested that UK banks are lobbying to block the bonus cap on twice base pay which Youel told the government to remove.
The volatile nature of investment banks' revenues means they must pay variable payments to manage profitability in tough times, Barclays Chief Executive Jes Staley said, and also pay up when business is booming.
When we have in fact delivered very strong revenue growth, that's reflected in compensation. We think we are being prudent in how we manage it, the president told reporters last week on a conference call.
One bank board rejected a management's rating of their team as too generous and said they had to downgrade it for fear of not having to pay out too much, Scholes said.
Even more retail banks are growing pay.
Lloyds, Britain's biggest mortgage lender, said it would spend an extra 100 million pounds in bonuses this year after axing them for all but its lowest paid staff last year.
Bank executives said they would have to continue paying despite concerns over public perception.
We have to reward people, said chief executive of a British bank, without wanting to be identified. People have had a difficult time, and if you stayed in a role and locked away and had to go above and beyond, you expect to be rewarded.