City bank chiefs face having bonuses halved

As the credit crunch hits its first anniversary and with Britain's biggest banks set to reveal much lower first-half profits this week, many bankers are being forced to accept they may get no bonus at all this year.

Last year, a record 4,200 leading bankers and financiers raked in bonuses of £1 million or more but that figure is likely to be much lower this year. It could even halve.

That will have a knock-on effect on the top end of London's housing market.

Financial recruitment companies said some banks are set to cut the amount they pay out in bonuses by anything from 30 per cent to 50 per cent this year. Many had already paid out their main bonuses last January and February before the long-term effects of the credit crunch were clear.

City and Dockland bankers who account for £10 million of business a year typically receive a basic salary of between £100,000 and £150,000 but can regularly see this increased by another £500,000 to £750,000.

In New York, Wall Street banks, most of whom have extensive operations in London, have already announced that they are planning to slash the amount they pay in bonuses by £9billion this year.

But the scale of cutbacks in London could be hidden because so many people have already or are likely to lose their jobs in the City.

Analysts predict up to 11,000 jobs are at risk this year with further major cutbacks likely next year. One headhunter said: "There are going to be a lot of zero pay-outs this year. A lot of people will get that and not be too unhappy. They'll just be happy to have a job."

There will also be clear distinctions between different sections of banks. Executives in bond trading and debt investment departments are likely to be worst hit. But those in areas such as energy and commodity trading could well be set for record pay-outs. The credit crunch has also been good news for bankers who have been recruited to replace former high-fliers at rival banks.

Thomas Montag, formerly of Goldman Sachs, starts work as head of global debt and equities sales and trading at Merrill Lynch in New York today on a guaranteed five-months bonus of £20million.

Barclays is this week due to reveal a 35 per cent drop in its profits in the first half of this year. This will give an early indication of how much the bonus will be cut for its star performer, president Bob Diamond who heads its Barclays Capital division.

Last year he picked up a pay and bonus package worth £18.5 million.