Pay packages for corporate finance and merger and acquisition bankers were up an average of 15% to 40% in 2000 in the US and Europe, according to research by headhunters TMP Worldwide.
In particular, competition to hire junior bankers has intensified, boosting bonuses. Second-year associates are expected to earn $280,000 (€300,000) on average, some 40% more than they made in 1999.
Bulge bracket bankers are the biggest beneficiaries of the big bonus payouts, but second tier corporate financiers are also prospering, the research shows. Managing directors in "major bracket" or second tier banks and boutiques are predicted to receive packages of between $1m (€1.1m) and $4m (€4.3m) this year, whereas their bulge bracket counterparts can expect between $1.4m (€1.5m) and $8m ( €8.6m).
While the allure of dot-coms might have faded, research still suggests that MBA graduates particularly in the US are strongly attracted to technology firms. Banks have had to increase their compensation packages in order to fight for the best talent.
Furthermore, according to TMP, banks are finding new ways of paying staff. They are setting up "co-investment funds", enabling senior and middle-level bankers to invest in companies. Such schemes could extend to junior bankers, according to TMP.