The Middle East’s top profit producers in the finance sector can look forward to being paid up to 200 per cent of their salaries in bonuses for this year, compensation experts said.
While the world finance markets are plummeting in bonus scales owing to the US credit crisis, the Middle East will record a 12 per cent increase in bonus levels, according to a projection by Napier Scott, a UK-based executive search firm focused on the debt, credit, forex and money markets.
Reasons range from increased fundraising activity to an insulation from the credit crisis spawned from the sub-prime mortgage meltdown in the United States.
Wall Street announced bonuses for 2007 that are cumulatively about 14 per cent higher than those paid by American investment banks last year. Goldman Sachs Group set a record for the fourth consecutive year, raising compensation to $20.1 billion (Dh73.7bn), with an estimated $12.1bn in bonuses. Goldman CEO Lloyd Blankfein alone will be paid close to $70 million in bonus this year. But if Goldman is removed from the picture, Wall Street bonus scales have actually declined by 25 per cent this year, Napier Scott’s CEO Shaun Springer estimates.
Other key financial markets across the globe, according to him, have declined too. While Europe’s bonus levels are down between 12 and 15 per cent, Asia will remain flat. In this context, the Middle East shines like a beacon, he said.
“Most other financial markets are on a downward trend for bonuses this year, but the Middle East is likely to enjoy an increase of between 10 and 12 per cent,” Springer said in a telephone interview from London.
“While the top producers [of profits] will be very well remunerated this year, the larger regional banks will see a maximum of one year’s salary as a bonus,” added Bill Allum, Napier Scott’s senior consultant for the Middle East. “Top producers were very well remunerated last year as well. Don’t forget there was no sub-prime issue last year.”
The higher bonus payout in the region will be on salary scales that were revised upwards by about 25 per cent this year.
Large regional investment banks such as Shuaa Capital, EFG-Hermes and Investcorp “behave more like international banks than regional ones and will thus remunerate competitively”, Allum said.
Attributing this year’s bonus boom largely to the IPO activity in the Middle East, Springer said the region has been experiencing a phenomenal rate of expansion. “We are also seeing increased sophistication of the Middle East investors and bankers in terms of product development. Also, the fees in the region are being squeezed,” he pointed out.
“The Middle East is continuing to enjoy the boom that the rest of the world was enjoying in the last five years,” he added.
Supporting Napier Scott’s projections is a survey finding by eFinancialCareers, a leading network of career sites for the global financial community. In total, 49.5 per cent of respondents to eFinancialCareers’ poll expect 2007 bonuses to be higher than 2006. Only 6.6 per cent expect them to be lower, and an opaque global outlook has left 43.9 per cent uncertain, it states.
Wall Street is paying record bonuses this year despite volatile markets. Goldman Sachs Group, for instance, which is Wall Street’s biggest securities firm, said its 2007 bonus pool rose 23 per cent to a record $12.1 billion (Dh44.43bn). Goldman Chief Executive Lloyd Blankfein, who received a record $54 million (Dh198m) in pay last year, will be paid close to $70m (Dh257m) this year. Morgan Stanley, the second biggest US securities firm, awarded co-president Walid Chammah an $8.9m (Dh32.68m) stock bonus for 2007.
With payouts at Goldman Sachs Group, Morgan Stanley and Lehman Brothers Holdings rising this year, the four New York-based firms are paying $49.7bn (Dh182.4bn) in salaries, benefits and bonuses this year, up from $43.5bn (Dh159.7bn) in 2006, according to company reports.
Bear Stearns, meanwhile, which is the fifth-biggest US securities firm, said none of the members of its executive committee will receive bonuses for 2007 after the firm reported its first loss as a publicly traded company. With revenue down 36 per cent in 2007 from a year earlier, Bear Stearns reduced compensation by 21 per cent to $3.43bn (Dh12.59bn) from $4.34bn (Dh15.93bn) in 2006.
Napier Scott’s Springer said: “It is absolute rubbish. Remove Goldman Sachs from the list and then talk. Goldman Sachs’s global bonuses alone account for the whole of London’s bonuses, for instance. If anything, I see the bonuses in the US markets dropping by 25 per cent this year.”
Average salaries and bonuses paid in 2007 (for 2006):
- Managing director, M&A, tier-one international bank: Salary $297,094; bonus $594,098
- Managing director, private banking, tier-one international bank: Salary $435,720; bonus $693,192
- Managing director, M&A, GCC bank in Dubai: Salary $237,670; bonus $237,670
- Managing director, private banking, GCC bank in Dubai: Salary $237,670; bonus $$237,670
Average private equity pay in Dubai:
- Associate: Salary $80,000 to $120,000; bonus 40 to 100 per cent plus carried interest
- Vice-President: Salary $120,000 to $200,000; bonus 80 to 120 per cent plus carried interest
- Director: Salary $150,000 to $250,000; bonus 70 to 150 per cent plus carried interest
- Managing director: Salary $200,000 to $500,000; bonus 100 to 200 per cent plus carried interest
Source: EM Financial Services & Napier Scott