London Banks Double Pay to Lure Talent

London's investment banks are luring back traders and analysts they lost to brokerage firms during the credit crisis, compensating for lower bonuses by as much as doubling base salaries.

"The banks are killing the boutiques," said Daryl Bowden, co-chief executive officer of ICAP Plc's (IAPLF) equities unit in Europe and Asia. The London-based firm is the world's largest broker of trades between banks. "They're doubling salaries and offering above-average compensation. Banks today have limited risk so people can work there without fear."

The benchmark U.K. FTSE 100 index's 57 percent gain since March and an expected rebound in mergers is prompting firms from UBS AG (UBS) to Barclays Plc (BCS) to add traders and sweeten remuneration packages to win back employees. The U.K.'s 50 percent bonus tax won't slow the flow of workers back to the banks because it's only a one-time levy, recruiters said.

The hires show how London's investment banks are regrouping after boutique firms poached traders during the credit crisis with the promise of greater job security and a bonus. London's investment banks cut about 49,000 jobs and logged more than $560 billion of writedowns during the credit crisis, according to data compiled by Bloomberg. Brokers including Eden Financial Ltd. and Liberum Capital Ltd. added sales traders and analysts to win clients from rivals that had received taxpayer bailouts.

"We have begun to see a boomerang effect," said Robert Iati, global head of consulting at research firm TABB Group in New York. "The larger banks are feeling a bit more secure in hiring back some of those traders from the smaller guys."

Citigroup, ICAP

David Knight, who left Citigroup Inc. (C) to join ICAP Equities in February 2008 as a sales trader, will join UBS this month to lead a team of salesmen catering to hedge funds.

Ray Jarmyn and Jamie Playle, two sales traders, left Eden Financial to join UBS in October and Unicredit SpA (UNCFF) in November. Steve Aspinall, who quit Lehman in 2008 to join Liberum Capital Ltd., a London-based broker that was founded in 2006, moved to Barclays Capital in August to become a sales trader. Andy Holmes left Shore Capital Ltd. in October 2009 to join Unicredit's equity sales trading team in London. The traders weren't available or declined to comment.

Zurich-based UBS and Bank of America Corp. (BAC) are the top equity traders in Europe by the volume of shares traded, according to a 2008 ranking by Greenwich Associates. Broking may generate $3.8 billion of fees in 2009, according to estimates from Tabb Group.

Managing directors at large securities firms had their salaries doubled from about 150,000 pounds ($239,000) a year to 300,000 pounds on average in the past 12 months, according to recruiters. A managing director at a smaller brokerage firm is still earning 150,000 pounds in base pay.

Salaries Increased

In July, Citigroup doubled the salaries of most managing directors, a rank reserved for senior bankers and traders, to about $400,000. Barclays, Britain's second-biggest lender, is also planning to raise investment bankers' base salaries, a person familiar with the matter said on Dec. 3. Credit Suisse Group AG (CS), Switzerland's largest bank by market value, said in October it will raise salaries for senior employees.

"I am seeing a move back," said Jason Kennedy, chief executive officer of recruiter Kennedy Associates in London, who has been working in the industry for about 13 years. "The investment banks came back sooner than expected. When bonuses are a bit scarce, doubling the base salary is a big improvement. The brokers can't compete."

London-based recruiters estimate that British Chancellor of the Exchequer Alistair Darling's plan to impose a tax on bonuses will affect at least 40,000 people, twice the government's estimate. The U.K. will impose a one-time charge of 50 percent on bonuses of more than 25,000 pounds, Darling told Parliament on Dec. 9. The tax will be paid by the banks, and employees will still have to pay income tax on their earnings.

While bankers are considering their options on relocating to Germany or Switzerland to avoid the tax, Kennedy said the bonus levy isn't an issue for traders and bankers looking to move after April to larger firms because the government has said the charge will apply only to this year's bonuses.