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Europe’s investment banks have cut bonuses for a second consecutive year, following a prolonged downturn in dealmaking and listings that may finally be subsiding. As reported by the Financial Times, Deutsche Bank and BNP Paribas are among those scaling back annual bonuses.
Deutsche Bank, Germany’s largest bank, announced a 5.5 per cent reduction in its bonus pool for the previous year, while BNP Paribas, the eurozone’s largest bank, reduced its pool by around 5 per cent, as reported by the FT, citing sources familiar with the matter.
UBS is expected to reveal its bonus pool by the end of March, following a challenging year for its investment bank. Meanwhile, HSBC stands out in Europe, having increased its company-wide bonus pool by 12 per cent, buoyed by a nearly 80 per cent rise in pre-tax profits. In addition, Credit Suisse has reportedly offered substantial packages to retain its bankers.
The reduction in bonuses highlights the dual impact of higher interest rates on lenders. Many European banks have benefited from a surge in net interest income, which has resulted in a boost to their profits and bank shares surging to a six-year high. However, their investment banking businesses have suffered as higher rates depressed activity in debt and equity capital markets.
According to the FT, European investment banking fees plummeted to $17.2bn in 2023, the lowest since 2016. This reflects a 47 per cent decline from the $30bn reported in 2021. Furthermore, European bankers receive smaller bonuses as a proportion of their income due to EU regulations that cap variable pay.
Meanwhile, average bonuses on Wall Street dipped 2 per cent last year to $176,500, according to estimates from the New York State comptroller.
Despite the cuts, investment banks are optimistic about a revival in dealmaking and listings this year. Mergers and acquisitions volumes are beginning to pick up, and Europe’s equities markets are experiencing their most robust start since the Covid-19 pandemic, raising over $3bn so far in initial public offerings.
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UK inflation fell to 3.4 per cent in February, down from 4 per cent in January, coming in at its lowest level in more than two years. The figures released today by the Office of National Statistics exceeded the expectations of both analysts and the Bank of England, who anticipated a fall to 3.5 percent.
According to the ONS data, the slowdown was largely driven by an easing in food price growth, which offset an upward trend in the price of motor fuels. Core inflation, which excludes food and energy, fell to 4.5 per cent in February from 5.1 per cent. Analysts had expected a reduction to 4.6 per cent.
The BoE had predicted in February that inflation would reach its 2 per cent target by the second quarter of the year due to declining energy costs, and today’s figures indicate that it is on track to achieve that target as early as April.
However, the Bank of England has stressed its inability to relax monetary policy yet, citing persistent growth in services prices and wages, and warning of the possibility of inflation gaining momentum again. Market expectations suggest that the central bank will keep rates held at 5.25 per cent during its upcoming policymakers’ meeting on Thursday.
Keeping UK rates unchanged tomorrow would align with the approach taken by the US Federal Reserve and European Central Bank, both of which have said they will only begin reducing rates once there is sufficient evidence of sustained lower inflation.
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JPMorgan has created a specialised sports-focused investment banking team, according to Reuters, citing an internal memo. Its newly formed “sports investment banking coverage group” will provide advisory and financing solutions for activities such as investments in sports franchises for clients worldwide.
In the memo, Fred Turpin, global head of media and communications investment banking at JPMorgan, highlighted the growing significance of sports as an asset class, with top franchises in the US and Europe valued at over $400bn collectively.
Despite global mergers and acquisitions volumes hitting a decade low, dealmaking in the sports industry remained strong last year. According to a report by the Institute for Mergers, Acquisitions, and Alliances, sports M&A activity amounted to $22.6bn. Looking ahead, Deloitte predicts that premium sports properties are set to achieve record valuations this year, drawing the interest of institutional investors.
JPMorgan has already been involved in notable deals within the sports industry, including advising on British billionaire Jim Ratcliffe’s acquisition of a minority stake in Manchester United Football Club and working with Formula One owner Liberty Media and World Wrestling Entertainment.
Additionally, JPMorgan’s existing sports financing franchise has supported stadium and arena financing for numerous teams across major US sports leagues and globally, including Real Madrid FC’s Santiago Bernabéu stadium.
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Switzerland’s central bank is facing a backlash from environmental organisations following the release of its sustainability report yesterday, revealing its investments were linked to 12mn metric tons of carbon emissions last year.
Among the Swiss National Bank’s investments are stakes in oil majors Chevron and Exxon Mobil, which form part of the bank’s foreign currency reserves totalling SFr655bn ($735bn) as of year-end 2023.
As reported by Reuters, Asti Roesle from Climate Alliance Switzerland, which represents over 140 non-governmental groups, condemned the SNB’s disclosure, estimating its investments could be linked to carbon emissions potentially three to four times higher when indirect emissions are considered.
Despite aiming for net zero carbon emissions by 2050, the SNB stated it would not consider altering its investment policy, citing its mandate for price stability over environmental objectives.
