Are banks' profits down to skillful bankers or generous taxpayers?

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Following the handsome profits made by most banks in the first quarter, and the equally handsome amounts put aside by banks for compensation, a debate is raging over the extent to which profits should be allocated in bonuses.

Evan Davis put the question to Barclays' John Varley in yesterday's Today Programme on Radio 4.

To what extent, asked Davis, are banks' recent profits down to bankers' skill? And to what extent are they down to help from taxpayers.

Varley opted for the former, stating that taxpayers stabilized the system but that the skill of bankers has allowed some institutions [Barclays] to outperform while others [UBS] have struggled.

Rivals appear to be reaching the same conclusion. Stuart Gulliver at HSBC likened his investment bankers to Hollywood stars.

But with banks making almost universally handsome profits in fixed income trading, where central banks have helped grease the wheels, is this really the case? And if not, is it time for bankers to paid a little less?

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