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Recovering Market Brings Bigger Paychecks
Asset Backed Alert, Harrison Scott Publications Inc. (January 22, 2010)
Wall Street institutions are boosting the pay scale for securitization bankers, traders and sales professionals in the U.S. this year.
Amid mounting evidence that the worst of the global financial crisis is over, investment banks recently began equipping themselves to handle a steadier flow of asset- and mortgage-backed bond offerings by seeking new structured-finance talent. And they're making sizable offers to the most desirable candidates, typically translating into pay increases of 15-20%.
Similar raises are also going out to existing personnel.
Among those boosting their bids are Barclays, Cantor Fitzgerald, Morgan Stanley and UBS. Nomura also let it be known in December that it would pay handsomely for skilled salesmen and traders. Sources additionally pointed to Goldman Sachs for increased compensation this year, following company-wide cuts that helped fuel a rise in profits in 2009.
Among banks that are hiring, many are making plays to rebuild once-active groups that were decimated by credit-crisis pressures. Others are seizing on opportunities created by a changed market landscape.
Take Barclays. The bank emerged as the world's most active underwriter of asset- and mortgage-backed bond issues in 2009, moving up from fourth place in 2008. As part of an ongoing push to solidify that standing, it brought in former RBS executive Elizabeth Padova-Hanson on Jan. 12 as a managing director focusing on originations of credit-card deals in New York.
Padova-Hanson left her former post about four months earlier. In the meantime, total annual compensation for someone filling a job like hers has risen to anywhere from $1.5 million to $2.5 million - representing a raise of $225,000 to $500,000, according to executive recruiters.
Banks are also expected to show strong demand for marketing professionals who can win new underwriting clients, along with sales specialists capable of placing deals and traders with secondary-market expertise. For instance, top-tier underwriters will likely pay their global structured-finance sales heads an average of $3 million to $3.5 million of combined salary and bonuses in 2010. That's an increase of $600,000 to $700,000.
A global head of structured-product trading will likely take home about $4.5 million, an increase of some $675,000.
Paychecks are also growing for junior staffers who typically earn less than $500,000 per year. For example, a trader with the rank of vice president can expect a base pay of $150,000 and a bonus of $150,000 to $200,000 this year. The combined compensation is up $60,000 to $70,000 from 2009.
On average, associate traders will get $80,000 to $120,000 of salary and a bonus of $55,000 to $65,000. A vice president in structured-finance sales can look for a base of $125,000 to $150,000 and a bonus of $100,000 to $150,000.
The increases are sure to come as a refreshing development for industry professionals, whose pay had come under severe pressure amid sweeping staff cutbacks, slackening deal production and government intervention since mid-2007. Now, banks are drawing in part on rebounding share prices to fuel their raises.
But there's a caveat: Like other Wall Street players, securitization underwriting sepcialists are receiving ever-growing portions of their bonuses in the form of stock. And those awards are often subject to multi-year holding periods with "clawback" provisions that employers can invoke if the staffers' actions lead to future losses.
To that end, recruiters say it is likely to become apparent by midyear which banks are able to craft the most appealing compensation packages. The timing reflects a so-called retrade they expect to occur in the coming months, as underwriters that cut staff not long ago attempt to replenish their ranks.
In many cases, that means dipping into the talent pools of broker-dealers that absorbed a large number of displaced bankers and traders during the financial crisis. Many of those individuals are now receiving much of their pay in the form of cash commissions, and might find banks' salary-heavy offers more appealing.
As those people return to their old duties, another rift is likely to emerge: While pay is rising for both current investment-bank employees and new ones, fresh recruits stand to benefit more as the institutions try to entice them with the juiciest offers. Headhunters think the effect will be strongest among high-level personnel, even prompting some to shift among investment banks in the months ahead. "You're going to see more of movement among the bigwigs," one recruiter said.
A total rebuilding is likely a few years off, however, and average compensation is still below pre-credit-crisis levels. Even with dealflow rising, new-issue supply remains at just a fraction of where it was prior to the market's implosion. A surplus of job seekers also remains. That means banks can be more selective, in many cases focusing on such intangible aspects as the ability of a prospect to work with others.
They're also showing greater willingness to hire workers with less experience, who may be more willing to embrace innovative financing and deal-modeling techniques - and are less likely to chafe at supervision by executives who are themselves relative newcomers to the business.