Investment bankers in India are staring at the possibility of taking home low to zero year-end bonuses this Christmas, as banks cut jobs and reduce costs due to a slowdown in the investment banking and fund raising transactions this year.
“Most investment banks are going through a rough patch. The deal volumes have been low and the business and regulatory environment is likely to remain uncertain. Retaining one’s job this year may itself be a bonus. Most employees will get very little, if any, bonuses this year, as payouts will be concentrated on incentivising and retaining top talent,” says Deloitte India Senior Director Avinash Gupta.
The team size of banks’ investment banking (i-banking) arms have been reduced to half in last two years to cut costs. The i-banking teams, of 13-14 earlier, have been brought down, so that bonuses could be shared by fewer people.
| SLOWDOWN ON THE DEAL STREET Indian merger & acquisition advisors’ ranking (year-to-date) | |||
| 01 Jan - 30 Nov 2011 | |||
| Rank | Advisor parent | Deal value at announcement ($mn) | No. of deals |
| 1 | Morgan Stanley | 15,921 | 9 |
| 2 | Goldman Sachs | 15,289 | 5 |
| 3 | UBS | 6,265 | 3 |
| 4 | Citi | 6,151 | 6 |
| 5 | Deutsche Bank | 6,127 | 2 |
| 6 | JPMorgan | 5,460 | 1 |
| 7 | HSBC | 2,782 | 5 |
| 8 | Avendus Capital | 2,256 | 19 |
| 9 | Barclays | 1,443 | 2 |
| 10 | Ernst & Young | 1,295 | 31 |
“I-banking bonuses are directly linked to sealed deals, which have been few this year,” says Randstad India MD & CEO E Balaji.
The year-to-date league table shows Citi leading in M&A transactions this year, followed by Goldman Sachs and Morgan Stanley.
| 01 Jan - 30 Nov 2012 | |||
| Rank | Advisor parent | Deal value at announcement ($mn) | No. of deals |
| 1 | Citi | 18,669 | 13 |
| 2 | Goldman Sachs | 12,715 | 7 |
| 3 | Morgan Stanley | 12,469 | 13 |
| 4 | JPMorgan | 11,883 | 11 |
| 5 | Barclays | 10,833 | 7 |
| 6 | Bank of America Merrill Lynch | 9,168 | 2 |
| 7 | Credit Suisse | 6,927 | 4 |
| 8 | JM Financial Ltd | 4,809 | 3 |
| 9 | Ambit Corporate Finance | 3,002 | 10 |
| 10 | Enam Financial Consultants | 2,891 | 9 |
Citi, JM Financial, and SBI Caps bankers could expect the best bonuses, as they concluded some of the marquee deals. Citi was the banker to some high-value block deals on the bourses. JM worked on the Diageo deal, while SBI Caps worked on corporate debt restructuring deals.
Making it worse for i-bankers, the likes of RIL, Piramals, Birlas and Ruias are setting up their own M&A teams to deal with sellers or buyers. Also, for the government’s divestment programmes, the bankers have to actually pay from their own pockets, as they quote low fees to be on the top-of-the-league tables.