Dangling 30% raises, European banks hire from US rivals

Bloomberg

European investment banks are back in the hiring game, raising the stakes for compensation on both sides of the Atlantic.
Firms including Barclays Plc and Deutsche Bank AG have been seeking to regain trading share by poaching personnel from American rivals, according to recruiters. For traders and salespeople who haven’t seen raises in years, the move can be profitable: European banks are offering pay packages as much as 30 percent higher and guaranteed bonuses in some cases, according to Mike Karp, chief executive officer of New York-based recruiter Options Group.
“The Europeans have realised that while they’ve been cutting costs and being a bit frugal in their behaviour, they’ve been losing business to the US banks and now they’re playing catch-up,” said Jason Kennedy, CEO of Kennedy Group in London, which hires for banks and hedge funds.
Wall Street traders lost leverage in pay negotiations after the financial crisis as European and Asian competitors receded, leaving fewer potential bidders for their services. As a result, banks including JPMorgan Chase & Co. have paid investment-bank employees a smaller chunk of revenue. In industry jargon it created a “bulge-bracket discount”—the lower pay relative to their production that traders and salespeople accept at a firm that’s considered a safe harbor.
Armed with fresh capital raised by the sale of stock and businesses, European firms have gone on the offensive. It’s a reversal from the past few years, when the beleaguered banks fired traders, pared balance sheets and restructured operations. Deutsche Bank CEO John Cryan said in March that his firm wanted to return to “controlled growth.” Credit Suisse Group AG said earlier this year that it’s done shrinking the trading business and will look to grow in high-return areas.
Competition for talent may put more pressure on all banks as they set year-end bonus pools over the next two months. Goldman Sachs Group Inc. and the investment-bank divisions of JPMorgan and Morgan Stanley set aside $22.3 billion in the first nine months of the year, almost 3 percent more than the year-earlier period.
European institutions have an unexpected selling point: Regulations there limit the size of bonuses paid to twice a person’s salary, meaning that some traders see the fixed part of their compensation skyrocket when leaving a US bank.
Barclays CEO Je s Staley, himself a JPMorgan veteran, took the top job at the UK bank in December 2015 and immediately implemented a hiring freeze, then cut thousands of jobs. When he shifted to expansion mode, he hired JPMorgan’s head of equities trading Tim Throsby to run Barclays’ trading and investment-banking units.
This year, Throsby hired former Goldman Sachs partner Guy Saidenberg as global head of sales and ex-Bank of America Corp. executive Filippo Zorzoli to run macro distribution for Europe, the Middle East, Africa and Asia.
Credit traders have been in demand as investors seek US corporate bonds, which provide higher yields than sovereign notes. Gary Rapp, former head of investment-grade trading at Goldman Sachs, joined UBS Group in a similar role.
Deutsche Bank hired more than half a dozen credit traders and salespeople this year. Among them is former Goldman Sachs partner Paul Huchro, who runs investment-grade trading globally as well as high yield in the US and Europe. The firm also picked up Jeffrey Chang and Vivek Raman, who joined from UBS just months after leaving Morgan Stanley.