Top Investment Bankers Are Set For A Fatter Bonus From The Falling $A

Sydney CBD: Getty Images

Australian investment bankers stand to receive slightly higher annual bonus payments this year with the falling dollar giving their share of global bonus pools a boost in the local currency.

Investment banking bonuses are typically distributed from a global pool of profits. That means bonuses are likely to be held in USD for JPMorgan, BoAML and Goldman Sachs, Euro for UBS and Deutsche Bank, and Yen for Nomura.

Australian subsidiaries of those firms will be allocated a share of the global pool, before converting the amount to AUD and distributing it among local employees.

Many of last year’s bonuses were paid early this year, when the AUD was high. But the dollar has fallen about 15% from its peak, and is tipped to fall further throughout the year.

EY partner Bruno Cecchini told Business Insider Australia that traders and investment bankers who worked for overseas subsidiaries were particularly susceptible to exchange rate fluctuations when it came to bonus time.

He noted that a 10% fall in the AUD wouldn’t necessarily mean a 10% boost to Australian bonus payments, explaining that organisations typically paid out bonus packages that included stock options that can’t be cashed in for a number of years.

British job site eFinancialCareers reported in May that the highest earners at Nomura had about 35% of their bonuses deferred for 3 years, while about 7-8% of smaller bonus packages were deferred.

Cecchini said any beneficial exchange rate effects could be offset by poor performance. Investment banks have faced a quiet start to the year.

The AUD was trading at about $US0.9154 on Monday. UBS economists expect the AUD to fall further to $US0.875 by next March and $US0.850 by June.

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