Fixed-Income Traders in U.K. Seen Facing a 9% Cut in Bonuses

  • Salary benchmarking site Emolument.com predicts cut to awards
  • Credit, foreign exchange and commodities traders to see drop

The biggest banks in the U.K. could cut bonuses for fixed income, currencies and commodities traders by about 9 percent after a turbulent year for global markets, according to Emolument.com.

Managing directors working on FICC trading desks based in the U.K. are likely to see bonuses fall to about 265,000 pounds ($400,000) on average in 2016 from 290,000 pounds a year earlier, the London-based salary benchmarking firm said in a statement on Monday. By contrast, awards for equities traders are set to rise after a better year for stock trading. 

Europe’s largest lenders are under pressure to cut pay for bankers and traders as they fight to improve shareholder returns amid slumping markets and tougher demands from regulators to hold more capital. Senior industry figures including Deutsche Bank AG Chief Executive Officer John Cryan have said pay needs to come down as bankers still earn too much money and are often promised rewards too quickly.

“Previously, receiving a ‘doughnut’ or zero bonus was akin to being encouraged to find employment elsewhere,” Alice Leguay, co-founder and chief operating officer at Emolument, said in the statement. “With ever more restricted bonus pools, it may be that doughnuts become more commonplace, as banks limit substantial bonus payments to key outperforming staff they simply cannot afford to lose.”

Despite a year of booming mergers and acquisitions activity, employees within lenders’ investment-banking divisions, which house deals advisory, capital markets origination and syndication operations, are likely to see their bonuses fall because of a slump in the number of initial public offerings.

Investment banking managing directors’ bonuses may decline by 4.4 percent to 239,000 pounds on average, according to the statement. Staff of an equivalent seniority in equities trading could see their awards climb by 2.3 percent to 361,000 pounds on average.

To make the estimates, Emolument analyzed the correlation between bonuses and deal volumes for the last three years, and extrapolated 2016 bonus predictions based on data for 2015.

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