When times are good in investment banking, people are a firm's most valuable asset. When they aren't, staff are just an expensive commodity. Well, the worm is turning, and firms are now looking to better reward their people - and bonus time is nigh.
Net revenues have recovered this year and costs remain low. More, then, to go round in bonuses ? Yes. The New York Post reports that the average bonus paid out by Wall Street's finest firms last year was $48,500 per employee. This year's numbers are thought likely to be 20% north of this figure.
Firm's are increasingly measuring the size of their compensation costs against revenues. Durings the mid-1990s, top firms are said to have had a compensation ratio of 55%. This figure is now way down. Merrill Lynch, for instance, confirmed that its Q3 comp ratio was down to 47.2%, compared to 51.1% in the third quarter last year. Bear Stearns, Lehman and Morgan Stanley are all said to have seen their compensation ratios fall over the last year.
So, with money in the bank and room to manoeuvre the comp ratio, investment bankers on Wall Street, too, look certain to be better rewarded this year. Not only will they have a job, but they will get more dosh to boot.