Investment bankers being wooed with a vengeance

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A new generation of Wall Street bankers is about to get a raise, as firms open wallets to head off defections to investment funds and Silicon Valley.

Bank of America plans to boost salaries by at least 20 per cent next year for junior staff in trading and investment banking globally, while Goldman Sachs Group increases salaries for junior US workers by about that much, according to people briefed on the decisions. JPMorgan Chase and Citigroup are considering similar plans, people with knowledge of those deliberations said. Morgan Stanley also decided this year to raise salaries for some mid-level bankers.

Wall Street firms have cut hours and improved conditions for junior bankers to stanch the loss of talent to competitors such as private equity firms and hedge funds, and to technology companies whose stocks have soared. Charlotte, North Carolina-based Bank of America also is among investment banks that have encouraged analysts to take time off on weekends.

“These firms want to hire the smartest of the top graduates, that’s part of building for the future,” said Paul Sorbera, president of Alliance Consulting, a New York-based firm. “They’re competing with tech firms that are a little sexier than finance to the younger generation.”

Bank of America is boosting fixed pay for summer associates who have been asked to join the company around August 2015, said the person briefed on the move, requesting anonymity because it hasn’t been announced publicly. Some new employees already working there also will get raises, while bonuses remain variable, the person said.

JPMorgan is likely to increase salaries by at least 20 per cent for some junior employees, the person familiar with its talks said. Citigroup is weighing a potential salary increase of about 20 per cent for analysts and associates, and the New York-based firm hasn’t yet decided what regions would be covered, the person with knowledge of its discussions said.

Investment funds are more aggressively poaching junior bankers who’ve already been vetted and taught the basics at big Wall Street banks. While that strategy stretches back decades, the approaches are starting even earlier in the novices’ careers and have come as banks struggle to keep costs and compensation down.

“There is a lot of competitive pressure for them when they are losing young junior talent that they have trained to private equity firms and to each other,” Michael Karp, CEO of recruitment firm Options Group said of banks. “They can’t pay huge amounts of bonuses as they have in past years.”

The financial crisis weakened banks’ footing. After 2008, firms slowed hiring while overhauling pay packages for top earners, emphasising salaries and deferred bonuses to discourage risk-taking for fast rewards. That’s now contributing to staff shortages and compensation tensions in the low and middle rungs of some companies, Sorbera said.

“They have a lot of senior people, and they haven’t been building the rank and file very much in the last five or six years,” he said. “They may just also be doing some catchup in salaries. We’ve already seen that with the more senior people, where salaries have really gone up and are a greater portion of compensation.”

Morgan Stanley is raising salaries about 25 per cent for associates and vice-presidents in its investment banking and underwriting units, a person briefed on its decision said last month.

Goldman Sachs' raises apply to staff in all divisions with the title of analyst, typically recent college graduates, said the person with knowledge of its plan. The move won’t affect bonuses, which are based on the firm’s and employees’ performance.

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