Britain's bankers will receive their biggest bonuses since before the 2008 global financial crisis when the large banks report their annual results over the coming weeks, according to a news report.
The hefty bonus payouts are likely to face criticism as more people start to feel the impact of higher living costs.
The big four banks – HSBC PLC (LSE:HSBA), Barclays PLC (LSE:BARC), Lloyds Banking Group PLC (LSE:LLOY) and NatWest Group PLC (LSE:NWG) – are expected to pay out bonuses of more than £4bn in total, the Guardian reported.
The four banks’ combined profits for 2021 are forecast to exceed £34bn, the highest since 2007 in the boom before the financial crisis.
Bankers will be rewarded in the form of bonuses for the high fees they generated from mergers and acquisitions (M&A) last year.
London’s M&A bankers earned fees of US$3.5bn (£2.6bn) in 2021, according to research by financial data provider Refinitiv for the Guardian.
The M&A banker fees were the highest paid since Refinitiv’s records began in 2000 and were fuelled by corporate takeovers as private equity cash and acquisitive American buyers targeted undervalued British companies, the report said.
The high bonuses will move hundreds more UK bankers into the EU’s “high earners” report, which details every banker earning more than €1m (£835,000) a year.
According to the European Banking Authority, 3,519 bankers working in the UK earned more than €1m a year in 2021, while 27 UK bankers earned more than €10m in 2019 (the latest year available).
NatWest, which report its results on Friday, is expected to post a £4bn profit for 2021 compared with a £351m loss in 2020, while bonuses are predicted to go up to nearly £300mln from £200mln, according to the Guardian.
NatWest is still more than 50% owned by the taxpayer following its bailout during the financial crisis.
Barclays is expected report profits of just over £8bn next Wednesday, with bonus payouts forecast to rise by £300mln to over £1.9bn, including a hefty bonus to former chief executive Jes Staley, who departed in November amid an inquiry into his links to convicted sex offender Jeffrey Epstein.
Lloyds, which paid no bonuses for 2020, is expected to pay out hundreds of millions in bonuses for 2021, while HSBC, which cut its bonuses by 15% last year but still paid out almost £2bn, is expected to significantly increase its pool this year and double bonuses paid to junior investment bankers, the Guardian said.
The bumper banker bonuses come as most Britons are seeing their income squeezed by higher living costs and after the governor of the Bank of England, Andrew Bailey, recently called on workers not to ask for pay rises to combat rising inflation.
Figures out today showed UK inflation hitting 5.5% in the 12 months to January, remaining at a 30-year high.
Figures from the Office for National Statistics released on Tuesday showed that average pay in the public sector rose by 2.6% between October and December 2021, while business and finance employees saw 8.1% pay growth due to “an increase in bonus payments”.
Gary Smith, general secretary of the GMB union, which represents 600,000 mostly frontline workers, told the Guardian: “These sky-high banker bonuses are a kick in the teeth for everyone suffering with the cost of living crisis.”
Luke Hildyard, the director of the High Pay Centre, which campaigns for executive pay restraint, said: “Decades of economic deference to the super rich have brought us to a point where bankers are raking in historic pay awards while the rest of the country is crippled by rising prices and wage stagnation.
“This wealth isn’t ever going to trickle down without action from policymakers. It’s in the interests of everybody, not least the banks’ shareholders, customers and lower-paid workers who ultimately bear the cost of these awards, that we strengthen employment rights, corporate governance and progressive taxation to build an economy that works for everyone,” Hildyard told the Guardian.