Average pay per head in investment banking sector has fallen from 9.5 times the private sector average in 2006 to 5.8 times in 2012, according to a study compiled by PricewaterhouseCoopers (PwC) for the Financial Times (FT).
The study, which compares a sample of nine investment banks with global companies in the FTSE 100 index, found that investment bankers still get more pay than other professionals, including doctors and engineers. It also reveals that investment bankers continue to earn £212,000 on average.
The pay premium that was built up amid the deregulation wave since the 1980s and the debt-fuelled bonanza in the past decade is becoming weaker six years after the financial crisis, find the research.
“Bank pay has fallen further and faster than many people think, and 2012 has seen a material reallocation of returns from employees to shareholders,” said Tom Gosling, a partner at PwC’s rewards practice.
Median profits at investment banks grew by 28 per cent in 2012, excluding the quirky effect of the valuation of their own debt. But pay fell 6 per cent. European banks pay cuts in 2012 despite strong profits shows how the changes go beyond cyclical adjustments.
“There have always been wild swings, but what is different now is that pay has changed structurally,” said Mark Quinn, a partner at Mercer’s rewards practice told FT.
Bankers, however, warn of a growing rift between the US and Europe, where regulatory pressure and slower revenue growth is pushing down pay much more markedly.
“There is somewhat less pressure at US banks. They still pay more overall and they pay a much higher cash bonus,” said Stephane Rambosson, a partner at executive research firm Veni Partners.
The research comes after the European Union members have unsettled bankers in London with a legislative plan to cap bonuses for the most senior staff and star traders to the same size as salaries.
The research comes after the UK failed to ward off new European Union rules limiting bankers’ bonuses earlier this month.