Brazilian investment bankers defecting to competitors won pay increases of as much as 25 percent in 2011 amid a shortage of experienced executives in Latin America’s largest economy.
While financial-services companies in London and New York shrank headcount and reined in compensation, Brazilian lenders and private-equity firms paid up for top bankers as they expanded, according to research by executive-recruiting company Options Group Inc.
“The talent pool is limited here,” Vinicius Bolotnicki, a partner at Options Group in Brazil, said in an interview in Sao Paulo. Even after some headcount reductions at the end of last year, there was a net increase in investment-banking jobs for 2011, Bolotnicki said.
Typical salaries for managing directors in Brazil are the equivalent of about $350,000 to $500,000, not including bonuses, compared with about $300,000 to $400,000 at top U.S. banks, Bolotnicki estimated. Average pay for U.S. investment bankers fell about 27 percent last year, while in Latin America it declined 1 percent, according to New York-based Options Group.
“The local debt and credit markets will be the next big thing,” Bolotnicki said, adding that foreign companies including Deutsche Bank AG (DBK), JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC) and Goldman Sachs Group Inc. (GS) have been adding employees to build local credit and bond services in Brazil.
The Brazil pay increases are still below the rate for 2010, when executives switching firms commanded raises of as much as 35 percent, according to Options Group. Europe’s debt crisis has forced some companies to pull back as estimates for economic growth in Brazil decline.
Options Group predicted banks will continue to hire in Latin America this year as long as the European crisis doesn’t intensify. The biggest challenge for investment banks in Brazil for 2012 will be to retain senior executives as fees decline from underwriting stocks and bonds and from advising on mergers and acquisitions, Bolotnicki said.
The industry’s total revenue from investment-banking fees in Brazil was about $891 million last year, according to Dealogic, an information and consulting service. That’s down from $1.16 billion in 2010 and the record $1.6 billion in 2007.
“Senior executives will get a larger piece of a smaller bonus pool, since they need to be retained,” Bolotnicki said. “Because of that, we are anticipating a very disappointing bonus season for the mid-level professionals, with very few exceptions.”
Some of the mid-level executives may move to other firms after the first quarter, when banks pay bonuses.
Brazilian banks typically pay their bonuses in cash, giving them an advantage over international companies, which pay as much as 70 percent of bonuses in shares to top executives, according to Bolotnicki.
Average compensation fell last year in all six regions researched by Options Group. Latin America’s 1 percent decline was the smallest. It compared with a 27 percent drop in both the U.S. and the Europe, Middle East and Africa region. Compensation declined 19 percent in the Asia region, 18 percent in Japan and 31 percent in India.
“In Brazil we saw an increase in the compensation of equity analysts and equity-derivatives teams,” Bolotnicki said, with wages rising 15 percent in Latin America for those jobs. Compensation at prime brokerages was up 10 percent in the region, according to the report.
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