With markets on song, i-bankers make a killing

For Most Investment Bankers,
Bonuses Range From 100-300%

May 09, 2007
Ashish Rukhaiyar
MUMBAI

INVESTMENT bankers never had it so good. With an increase in overseas players making a mark in the country, their bonuses have gone through the roof. A host of factors like rise in volumes in the stock market, increase in mergers and acquisitions and the consequent rise in financing and a talent shortage in the industry have fuelled such a sharp rise. Bonuses this time have been in the range of 100% to 300% in most of the well-known investment banks.

With volumes in the stock market increasing, brokerage houses have seen one of the sharpest rise in bonuses. They have also seen some of the largest payouts. If sources are to be believed, head of a foreign brokerage house has received one of the largest bonus payouts of over $3 million. The research head of the firm is also said to have received a similar amount.

The differences between bonuses among the Indian players and overseas players have also risen this year. According to bankers, bonuses in some of the bigger overseas players have ranged anywhere from 175% to 300%, while those for the bigger Indian outfits have been between 125% and 175%. In fact, some of the bigger Indian players, like Kotak Mahindra, are yet to announce their bonuses for last year.

Foreign I-banks use fat bonuses to attract talent

OF late, companies have become vary of giving out names due to the fear of extortion threats to their key employees. Incidentally, though there has been a rise in the number of people who got bonuses of over $1 million, the sharpest rise has been in the $0.5- $1 million slab. The number of bankers who received bonuses in this range is said to have more than doubled.

Sources say that some of the new foreign players have even paid bonuses of two years upfront to attract talent. This include the bonus that one would have got in his previous employment.

Some of the bigger brokerage houses have seen volumes increase of over 50%. The secondary market have witnessed an impressive growth in the trading volumes. On the Bombay Stock Exchange (BSE), the total volume rose by nearly 18% in FY07 compared to that of FY06. On the National Stock Exchange (NSE), the turnover increased by nearly 24%.

"The bonuses of merchant bankers are directly related to the stock market performance and even though the recent past has been volatile, the past couple of years have seen both the primary and the secondary markets on a roll and this has led to a hefty rise in the bonus payouts,” says a banker with a domestic investment bank. “The volume of transaction has also been on the rise,” he adds.

As far as domestic issues are concerned, merchant bankers are able to charge a higher percentage for smaller issues, which, at times, can be in the range of 1.5% to 3%. However, for bigger issues, it comes down to around 1% as the bankers are more interested in being associated with the issue.

Some of the biggest paymasters are CLSA, Deutsche Bank, Barclays, Merril Lynch, Citi and UBS. Sources add that while Deutsche has given a bonus in the range of 250% to 300%, for Merrill Lynch it has been in the range of 150% to 250%. JP Morgan has also rewarded most of its bankers with 200% bonuses. ICICI Securities bonus payout has been in the range of 100% to 175%.

Compared to previous years in the treasury side forex, derivative dealers and bankers who were involved in financing got bigger bonuses, but they were much smaller than those received on brokerage and reset side.

Interestingly, the quantum of bonus also depends on a designation change. “At times, a banker is not given a promotion, but is rewarded with a higher bonus. On the other hand, a promotion is packed with a lower bonus payout. For example, if a banker is promoted from a vicepresident level to a president’s level, he will be given a 100% bonus, while another vice-president will get a 140% bonus with no promotion,” say sources.