Investment bankers will have more spring in their step in 2015 amid expectations of moderately better bonuses on average in January and February, helped by selective hiring and healthier fee income at many firms.
Several recruiters and investment banking bosses canvassed by Fairfax Media were confident of slightly higher average bonus payments in 2015 to boost employee retention and reflect improved deal activity last year.
US-based investment banking behemoth's including Goldman Sachs, Morgan Stanley, Citigroup, JPMorgan and Bank of America-Merrill Lynch are the first to report fourth-quarter earnings, beginning January 14. Most local employees of those firms will learn of their bonus in that week and payments typically flow several weeks after that.
Banker optimism around bonuses is underpinned by a record year in 2014 for local initial public offerings and a notable improvement in merger and acquisition activity.
"I think people will be relatively happy this year," a senior banker said of bonus payments on the basis of anonymity. "Banks generally will look to keep their people happy particularly their junior people."
Bonuses, while helped by improved activity, are highly individualised and are used to retain and reward top staff. In the past four years, many bankers faced poor or zero bonuses due to lacklustre deal activity, job cuts and heightened regulatory scrutiny on compensation.
Another local senior banker said bonuses this year across local firms would be a "mixed bag" as some had outperformed and were likely to secure a bigger share of their company's total bonus pool for Asia.
"For the firms that have done ok, on average bonuses will be up 5 per cent to 10 per cent," he said, declining to be named. "Total pay for some employees will be flat, while some will be up 20 per cent."
He also noted that zero or "doughnut" bonuses were unlikely to be a feature of this year's bonus season. While there will be more champagne flowing in coming weeks, it still remains a far cry from the flashy bonus days that preceded the global financial crisis.
Massive legal settlements by investment banks for cases of misconduct, while provisioned for, are also taken into account when compensation ratios are set by global boards and chieftains.
Unlike local dealmakers, institutional equities employees such as traders and sales people still face a tough bonus environment. Equity trading volumes in Australia remained soft in 2014, and activity is expected to be much the same this year.
But for those at US firms, the currency will be a boon. Those banks pay bonuses in the greenback, providing a boost given the currency's relative gain against the Australian dollar. US firms such as Morgan Stanley are also unwinding the deferred nature of cash bonus payments.
Deutsche Bank kicks off reporting season for the European banks in late January, followed by UBS and Credit Suisse in February.
Senior consultant at recruitment firm Anton Murray Consulting Jason Hutchins was upbeat on bonus season saying there will be a notable increase in payments for many employees compared to last year.
"You should have happier bankers this time," he said. "If banks can give employees something that resembles a decent bonus that will keep them there."
Mr Hutchins said retention was top of mind as many firms were looking to expand their junior and mid-level ranks, in areas such as infrastructure advisory ahead of a wave of state and federal government privatisations.
Managing partner at recruitment company Platinum Pacific Partners Victoria Biggs expects a slight average increase for local bonus payments.
"While it is true that revenues were well up in the calendar year 2014 compared to 2013 and team sizes remain tight, most seem of the view that in a still cautious climate, bonus numbers are not likely to deviate hugely from those of last year."
Compensation for bankers, traders, and sales and research staff is assessed on divisional, geographic and individual performance by bosses who aim to preserve the bonus pool to reward top performers. Home-grown financial services firm and investment bank Macquarie Group rules off its financial year on March 31, so its bonus period comes several months after that. Macquarie's compensation is always closely watched by analysts and investors.