Investment banks booming as RBS chief nets pay deal

INVESTMENT banks are on course for a year of record profits, as they take advantage of dwindling competition to hoover up business from governments and companies raising money in the markets.

Bankers at Goldman Sachs are expecting mammoth bonuses, after the investment banking division booked profits of more than £500m in the first quarter, nearly half of the £1.2bn it made for the whole of 2008.

Rivals have also enjoyed a lucrative start to 2009, with Barclays Capital’s first quarter profits up 361 per cent to £968m and Deutsche Bank’s investment bankers moving £54.8m into the black for the first quarter, after losing £6.2bn last year.

Henk Potts of Barclays Capital, said the industry was “booming”.

“Fixed income, commodities and currency are all doing fantastic volumes. Margins are very wide so there’s a tremendous amount of opportunity,” he said.

Andrew Evans, managing director of recruiter Morgan McKinley, also pointed to a gradual increase in the number of loyalty awards.

“Retention bonuses have crept back into the recruitment vocabulary recently,” he said.

Signs of a bonus bonanza came as it emerged that Royal Bank of Scotland chief executive Stephen Hester will net up to £9.6m for his efforts to revive the bank.

UK Financial Investments (UKFI) -– which manages the government’s 70 per cent stake in RBS – is understood to have met other shareholders to approve the deal last week.

Hester will earn a basic salary of £1.2m, around £2m in annual non-cash bonus awards and nearly £6.4m in share options.

Hester’s deal will depend on the bank’s share price moving above 70p, a level at which the government would make £8bn if it were to sell its stake.