eFinancialCareers

Bankers working in mergers and acquisitions (M&A) and capital markets should benefit from above average salary increases this year, but M&A bankers are likely to be the bigger beneficiaries when it comes to bonuses.

A survey of small to medium-sized City of London financial services firms found M&A and capital markets bankers have seen base pay rise nearly 7% during 2005. It predicts M&A bonuses will be the highest across all sectors, at more than 60% of salaries, compared to just 30% in capital markets.

David Atkins of Monks Partnership, which carried out the survey, said the findings revealed a surprising uniformity in salary rises. With the exception of M&A and capital markets, most investment banking employees saw salaries increase between 3.5% and 4%.

Headhunters questioned the figures. Clare Harris, a fixed income consultant at Alexander Mann financial markets, said bonus figures were too low. “Average bonuses for front office fixed income positions are likely to be at least 100% of pay in large banks and 70% to 100% of pay in small and medium-sized banks,” she said.

With the exception of hot areas like structured credit, 2005 bonuses in debt capital markets are likely to be similar to last year, said Harris. Julian Bell, an equity capital markets (ECM) consultant at search firm Sheffield Haworth said ECM bonuses should also prove flat: “ECM deal revenues are still squeezed and there have been a few large block trades that have gone wrong.”

Recruiters conceded the health of bonus prospects in the M&A sector, but said bonuses will be multiples rather than fractions of salaries. Dee Symons, co-head of global banking and markets at Russell Reynolds in London, said bonuses for senior M&A bankers could rise as much as 40% this year. By comparison, she says growth in base pay is irrelevant: “The salary is such a small part of the overall package that it’s meaningless.”

Base is more likely to be on the increase for associates and analysts in M&A, said Symons. She said associate salaries have risen from £58,000 to £61,000.