Among go-getting graduates who strike gold before their silver birthdays, the most successful are probably investment bankers. Many of them make six-figure salaries as early as 22 years in their first year of employment after school.
Naturally, it is not just their cousins and their former college mates who want to know exactly how much they make. We also want to find out how well their gig pays. So, here goes: a look at salaries of investment bankers at four levels in as many countries. Read this before proceeding: Investment banking careers.
In the US, the average starting base salary for analysts is between $75,000 and $96,000 a year. But a first-year banker who is worth his salt usually targets annual earnings of a total of at least $140,000.
However, a blogger points out that such “target figures” or “annual earnings” are incomplete, because they don’t consider a range that takes into account salaries given by different banks and groups, or the “buckets” that bankers are put into, which have a big say on how much bonus bankers get. These figures often don’t say whether they include signing bonus ($5,000-$15,000 for analysts depending on the size of the firm) and stub bonus (bonus given for employment for part of a year, and may be $20,000-$30,000 for analysts or a small percentage of base salary).
So here we look at bonuses, too. Analysts who earn a base salary of $85,000-$100,000 may receive a bonus of $50,000-$100,000 to take their total remuneration to $135,000-$200,000 (pre-tax, excluding stub or signing bonus). Associates with a base salary of $100,000-$120,000 and with a bonus of $80,000-$130,000 will have a total package of $180,000-$250,000.
A vice president earning a base salary of $120,000-$150,000 may pick up a bonus of $100,000-$250,000 to make $220,000-$400,000 a year. A director or managing director paid a basic salary of $300,000-$1,000,000 may see a bonus of $200,000-$10,000,000 to put by a fortune of well over $10,000,000.
According to another source, the base salaries of interns or summer analysts is estimated at $70,000, year-1 analysts at $84,000, year-2 analysts at $92,000, and more senior analysts (three years or more) at $95,000, all of them earning bonuses between $50,000 and $100,000. Associates’ first-year base salary is pegged at $144,000 (bonus $80,000-$130,000), a vice president’s at $218,000 (bonus $100,000-$250,000), and a director’s or managing director’s at $246,000 (bonus $200,000-$10,000,000).
Another estimate gives analysts’ total compensation at $140,000-$200,000 (first to third year; with year-end bonus of 70 percent to 100 percent), associates’ at $250,000-$400,000 (year-end bonus 100 percent or more of base), a vice president’s or directors at $450,000-$700,000 (bonus 120-150 percent), and a managing director’s around $1,000,000 or more (bonus may be in millions of dollars).
As can be seen, base salary and bonus are the two main components of a banker’s remuneration. For senior bankers, the bonus can be more than the base salary and sometimes many times that figure. But seniors at bulge-bracket firms can’t always take the bonus home immediately as it may be in stock or deferred compensation. The calculation is not always simple but depends mainly on individual performance.
The remuneration is high because transactions earn high fees, and bankers, who need to be skilled, smart, and hard-working, are amply rewarded. But the per-hour wages of bankers tells more about the story. Most analysts and associate, who form the lower levels of investment bank hierarchy, work about 100 hours a week. If so, the hourly wage of an investment banker who earns $100,000 is $20, and someone who achieves the “target salary” of $140,000 is $27.
In addition to salary and bonus, bankers benefit from health insurance, vacation, and profit-sharing or retirement packages. Health insurance is particularly more valuable in the US compared with Europe, Canada, and Australia, for example.
After New York, London is the biggest center for investment banking. Base salaries for analysts are £50,000, £55,000, and £60,000 for the first to third year, respectively. Average bonuses are £30,000-£35,000, £35,000-£40,000, and £40,000-£50,000.
At an exchange ratio of 1.27 dollar to 1 GBP (as on December 30, 2018), the total compensation for UK analysts is £80,000-£110,000, or, in US dollars, $108,000-$140,000, less than their US counterparts, who earn $140,000 to $200,000. This may be perhaps of Brexit or a cap on salary-to-bonus ratio or a difference between methodologies used for surveys.
Associates earn base salaries of £80,000-£120,000 in London, and VPs £140,000-£160,000. The total compensation for associates is £120,000-£220,000, and for VPs £250,000-£350,000, both substantially lower compared with US salaries.
Another estimate has it that investment bankers in London can expect their salary to rise from £72,000 (salary plus bonus) to £93,000 as they move from analyst 1 to associate 2 between 22 and 25 years of age, to £294,000 as they progress from associate 2 to VP between 25 and 30 years, to £380,000 from VP to director between 30 and 35, and to £1.1 million or more from director to managing director (if this promotion happens) between 35 and 40.
Now for a disclaimer. The above estimates are of salaries for front-office investment banking, not for other departments, such as risk. Moreover, you may not survive till your 30s in investment banking, you may not be promoted to MD, you may not be paid a million, and you may see up and down years. But, not to take the feel-good factor out completely, investment banks do love their people: Goldman Sachs, for example, paid its top 700 bankers in the UK £1 million in 2016. Read Investment Banking in Europe
The investment banking industry in Canada is smaller compared with the US (fewer hubs, such as Toronto, Vancouver, Montreal, and Calgary), less structured (direct promotes from analyst to associate are more common), and differently focused (a few main sectors are mining, energy, and natural resources). The work hours are nearly the same as they are in the US and in other developed markets.
The average investment banker base pay in Canada was C$77,810 as of December 2018, when one Canadian dollar equaled nearly 0.75 US dollar. The average bonus was C$5,161 and the average profit sharing C$1,750. The base pay range was C$42,000-CS$190,000, the bonus range was C$1,967-C$76,026, and the profit-sharing range 0-C$44,698. The total pay range was C$41,835-C$195,027 (US$32,000-$146,000).
Experience-wise, newbie investment bankers with less than five years’ experience may earn an average total compensation of C$63,000 (US$47,000, which is much less than US analysts’ total pay), those with five to ten years under the belt C$110,000, and those with 10 to 20 years C$140,000, according to a survey. Interestingly, unlike in other countries, the average total compensation starts to saturate and even decline after 20 years for bankers and tends to hover around C$100,000.
Investment banks in India earn lower fees compared with the fees in other countries, and this affects bankers’ salaries in the country. A comparison of Indian investment banking salaries with salaries in other countries based on cost of living was not immediately available.
According to Glassdoor, as of December 2018, the average base pay of analysts in India was Rs. 12,74,000, and the average base pay range Rs. 523,000-Rs. 1,614,000. As per Payscale findings, the average analyst base pay was Rs. 4,62,000, and the total average compensation a maximum of Rs. 1,100,000.
According to Payscale, as of December 2018, the average total compensation of associates was Rs. 1,935,000 at the highest end of the spectrum, with Rs. 1,660,000 base pay and Rs. 309,000 bonus. Glassdoor reports that the average base pay of associates was Rs. 1,274,000, and the range Rs. 523,000-Rs. 1,614,000.
The average pay of investment banking vice president in India was Rs. 25,980,000 as of December 2018, reports Payscale. The average base salary range was Rs. 1,599,000-Rs. 4,660,000 and the bonus Rs. 1,94,000-Rs. 4,664,000. The average total compensation was between Rs. 1,980,000 and Rs. 5,667,000.
Total annual remuneration in the respective currencies: American Dollars (USD → $), British Pounds (GBP → £), Canadian Dollars (CAD → C$), Indian Rupees (INR → ₹)
|Levels & Years||US||UK||Canada||India|
|Analyst (<5 years)||$135,000-$200,000||£80,000-£110,000||$63,000||<₹ 1,100,000|
|Associate (5-10 years)||$180,000-$250,000||£120,000-£220,000||$110,000||<₹ 1,935,000|
|VP (10-20 years)||$220,000-$400,000||£250,000-£350,000||$140,000||₹1,980,000 – ₹5,667,000|
|Director/MD (>20 years)||$200,000-$10,000,000||£1.1 million>||$100,000||Not available|
From various online sources
According to blogs and other online articles, bulge-bracket banks in India, such as Credit Suisse, pay their pre-MBA analysts Rs. 1,200,000-Rs. 2,200,000 basic salary and a 40-80 percent bonus depending on the bank’s performance in a financial year (that is, Rs. 1,680,000-Rs. 3,960,000). Analysts’ salary at boutique banks, such as Avendus, Rothschild, SBI Capital, and Kotak, range from Rs. 8,00,000 to Rs. 1,200,000 and the bonus from 60 percent to 70 percent.
Bulge-bracket banks pay their associates with MBAs a base pay of Rs. 2,500,000-Rs. 4,000,000 and a bonus of 50-80 percent, according to a Quora article. The base pay of associates at Indian boutique banks may be between Rs. 2,000,000-Rs. 3,500,000, according to web postings.
An interesting analysis from New York has it that investment bank analysts in the US may not be able to save all that much from their base salaries, and they need to invest their year-end bonuses wisely for future plans. With a base salary of, say, $85,000, the monthly salary is about $7,000, which is only $4,900 after the taxman’s visit.
After paying $2,000-$2,500 rent for a small apartment (this is New York), they will be left with $2,400-$2,900, and finally, $1,000-$2,000 after student loan repayments, food, transport, entertainment, etc. Saving $12,000-$24,000 may be a possible for financially wise fresh graduates, but it is how they invest their year-end bonus that will shape their future plans, the analysis finds.
– Top bulge bracket investment banks
– The dark side of investment banking
– How to become an investment banker
– From engineering to investment banking
– More investment banking blogs
References: 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14