US banks to hand out hefty bonuses

Rumblings from Wall Street suggest that investment banks in particular will report robust figures, triggering big payouts that will put pressure on banks on this side of the Atlantic to follow suit.

The US bank bonuses will apply to thousands of bankers working in London, creating a level for UK banks to match when they announce bonuses next month.

"All the big investment banks have been going like gangbusters, and the anticipation over here is that it is going to be a healthy year for bonuses in the investment banking sector," one US source said.

Last year, Goldman Sachs cut the proportion of revenue allocated to pay from 48 per cent to 35.8 per cent, the lowest in its history.

However, the average payout per employee of $498,000 - more than 306,000 at that time - still sparked outrage. Some 5,500 staff at Goldman Sachs, which posts its year-end figures on Wednesday, work in London.

Others US financial giants reporting this week include Citigroup, Morgan Stanley and Bank of America. They follow Friday's results from JP Morgan, which surprised analysts by beating fourth quarter profit expectations.

JP Morgan, which like Goldman specialises in raising capital and related activities, said it would set aside $9.73 billion (6.2bn) to cover basic pay and bonuses for its investment banking division.

That is up from last year's $9.33bn, though the average packet will fall slightly to just shy of $370,000 as a result of employing more staff.

Though JP Morgan's results were welcomed, Jim Sinegal, banking analyst at Morningstar, noted that JP Morgan had increased the amount put aside to cover any possible legal costs related to the controversy over bungled home evictions in the US.

He predicted this particular "hangover" from the subprime crisis would be suffered by others, with "lesser-quality" institutions such as Bank of America suffering from even greater exposure.