NEW YORK (Reuters) - Bankers from North America to Europe expect their bonuses to rise 10 percent or more this year despite regulators’ efforts to curb financial sector compensation in the wake of the 2008 industry bailouts.
Based on a poll of 46 bankers at the Reuters Global Mergers and Acquisitions Summit, 52 percent said they expect bonuses this year to be 10 percent or more higher than in 2010.
Thirty-five percent of the respondents said they expect bonuses to be flat to 10 percent higher than last year, and 13 percent see bonuses unchanged. None, however, expected bonuses to fall.
The poll results mirror predictions by Alan Johnson, who has been tracking Wall Street pay for two decades as head of Johnson Associates.
Johnson has said bankers can expect their bonus packages in 2011 to be 10 percent to 15 percent richer on average than last year.
Last year, Wall Street paid out $20.8 billion in cash bonuses, the fifth-highest amount on record. Still, the average payout fell 9 percent from a year earlier as financial reform drove banks to offer higher base salaries and defer more compensation.
The average cash bonus in 2010 was $128,530, according to the report released by New York state comptroller Thomas DiNapoli. The top five U.S. banks paid staff a combined $119 billion for 2010, according to bank consolidated income statements.
“Credit Suisse has one of the more rational compensation philosophies. It aligns both deferrals and returns. We are on the leading edge of that,” said Andy Lipsky, Americas head of mergers and acquisitions for the company, at the Reuters Global Mergers and Acquisitions Summit.
Bankers’ bonuses became scrutinized after governments worldwide provided trillions of dollars to bail out banks during the financial crisis in 2008.
Last month, U.S. securities regulators issued a proposal to curb bonuses at brokerage and investment advisory firms.
The U.S. Securities and Exchange Commission voted 3-2 to issue for comment a plan for the wealth management industry that is substantially similar to one previously proposed by the Federal Deposit Insurance Corp for banks.
The measures, required by last year’s Dodd-Frank financial law, are aimed at reducing incentives for executives and other top employees to take excessive risks. They require more disclosure of pay schemes and in some cases deferral of bonus money to later years.
The U.S. plan to limit financial services pay is softer than that of the European Union, which in December set guidelines that limit top bankers to receiving 20 percent of their annual bonuses upfront in cash, with some exceptions.
Unlike in other industries, bankers typically rely on year-end bonuses for a large portion of their yearly compensation. Bonuses can account for about 80 percent of top-level employees’ overall pay, according to compensation consultants.
The scrutiny on bonuses and the move to curtain hefty payouts has made it difficult to recruit and retain talent, especially among younger professionals who are reluctant to put in the years of work without the promise of a reward, bankers said.
“We are seeing with some of the junior folks who are not passionate about it but did it because it’s sort of the thing to do coming out of business school,” said Mary Anne Citrino, senior managing director at Blackstone Group.
“We have lost a bunch of the junior people for lifestyle reasons who want to go to some small boutique in North Carolina or whatever. They are just saying, ‘The money is just not worth it. My life sucks. I live in the office, I have no life,’” Citrino said.
Since the headline-grabbing paydays are mostly reserved for top tier executives, younger associates are finding it more attractive to go into other industries, bankers said.
“The war for talent has been very active for many, many years. The overall value proposition for investment banking for someone coming out of college — it’s very competitive,” said Larry Hamdan, executive chairman of global M&A and global head of industrials at Barclays Capital.
“For junior bankers, they have to think of the relative choices available to them. Think back on the tech bubble, P/E bubble, emerging markets — young bankers will make different choices,” Lipsky said.
Despite the loss of some junior talent, those who remain are more committed to banking, some said.
“The upside to that is you are left with people who choose it because it’s a career and it’s not a quick buck. When we recruit, we are trying to recruit for the long term. That has been difficult in the past,” said Larry Portman, Rothschild’s managing director and head of consumer products for the Americas.
“You should do it because you love doing it. It’s the same if you play baseball — whatever you do in life — you should do it because you love it,” said Guy Phillips, global head of consumer products and retail at UBS UBSN.VX.
Reporting by Jessica Hall; Editing by Richard Chang