After a challenging year in terms of mandates, the announcement of the investment banking analyst bonuses and pay reviews this summer was eagerly awaited. There was speculation on whether base salaries for 2010/2011 would be maintained at the same levels as last year when there was a significant uplift, or if they would be increased again.
In the event, there was no uplift for analysts. The analyst base salaries remained at or around the same levels as last summer. Bonuses were also more conservative this year with an average of 50% for first year analysts, 70% for second year analysts and 90% for third year analysts.
We’ve seen evidence of dwindling numbers of second and third year analysts, with significant departures early on in the year and following the summer bonuses, as private equity funds began to pick through the star analysts within the banks for the first time in a year. The new analyst intakes have nearly doubled for 2010/2011 in an attempt to compensate for the reductions in team numbers in a market quickly gaining momentum. Salaries for analysts starting now, i.e. class of 2010 are in the range of £40,000 to £45,000 across the major banks.
In contrast, it’s the turn of the associates to see a significant shift in their compensation. They’ve been told to expect uplift in their base salaries of circa 20% from January. Third year analysts transitioning to the first year associate grade have been awarded a sign–on bonus of on average £22,000 across the major banks.
They also received bonuses in the region of 80%-100% and were told to expect a further £20,000 stub bonus in January 2011.
It will be interesting to see what levels the bonuses will reach for second and third year associates in January 2011, although we expect them to be more conservative than last year following the significant uplift in base salaries.
From our candidate meetings it’s clear that private equity remains top of the wish list for those who have completed their analyst programs and even those with barely one year’s experience. The impact of the significant salary increases has however translated into increasing pressure for private equity funds to meet these salary levels if they want to recruit outstanding candidates from banking backgrounds. It also means potentially revising the salary levels for VPs as total compensation for investment banking associates is beginning to overlap with more senior professionals.
Currently, with many private equity funds focusing on more junior hires, the question remains whether they will be able to provide competitive compensation for those wanting to move into the sector particularly at the associate levels.
Sharon Chammah - PER
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