With U.S. investment banks engaged in another round of salary hikes for people in their analyst and associate classes, the differential between salaries at U.S. and European banks is wider than ever.
In the past few weeks, JPMorgan, Bank of America and Citi have all introduced another increase to the salaries they pay their most junior bankers. European banks have, however, been woefully silent.
This might be because most European banks have yet to announce their bonuses, and are planning to inform junior employees of salary increases when they do. Or, it may simply be that Europeans plan to delay salary rises for as long as possible after already hiking salaries for their analyst classes last year.
The chart below shows our understanding of current salaries for first years working in M&A and corporate finance at leading investment banks and boutiques in London. By far the highest paying boutique is thought to be Centerview Partners. The lowest paying bank in salary terms is thought to be Deutsche Bank. Most U.S. banks are now paying first year analysts £10k a year more in salary than Europeans.
This discrepancy continues in year two, when most U.S. banks now pay their London analysts salaries of £80k, but most Europeans pay £65k - £5k less than U.S. banks pay first years.
Not all banks have third year analysts these days, but where they still exist, U.S. banks will typically pay salaries of £95k, while Europeans are stuck at £70k.
Clearly, it's not just about salaries: there are bonuses too. But European banks don't necessarily distinguish themselves when it comes to bonuses, either. While banks like Goldman Sachs have begun paying bonuses that are close to or more than 100% of salaries to juniors, European banks are more likely to stick to the old model of paying bonuses of between 50% and 80% of salary.
The salaries in the charts below have not been validated by the banks concerned.
Deutsche Bank CEO Christian Sewing said last week that he was "very concerned" about the level of pay inflation in banking, but that it's necessary for DB to play the game in order to retain talent. Sewing's concern is understandable: this time last year, first year analyst salaries at Deutsche Bank in London were £50k. If DB hikes to £70k to match U.S. banks, salary inflation for juniors will be running at 40% a year.
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