Lehman Brothers’ top investment bankers in London have been offered large guaranteed cash bonuses by Nomura, the Japanese lender that this week bought the European and Asian operations of the bankrupt Wall Street bank.
Nomura has offered to pay Lehman investment bankers the equivalent of last year’s bonus, in cash, if they stay until the autumn of 2009. It has also promised that the 2009 bonus pool will be the same size as last year, though a proportion will be in the form of restricted stock.
News of the cash bonuses – part of a $1bn (£544m) pot Nomura has set aside to keep Lehman staff – comes at a time when compensation in the City is under intense scrutiny from politicians and regulators.
Gordon Brown has called for an overhaul of investment banking bonuses and the Financial Services Authority has threatened to impose additional capital charges on banks that do not adopt longer-term bonus structures.
The Nomura pledge contrasts with the mood at many rival investment banks, which are cutting bonuses and firing staff as a result of the markets slump. Even during the boom, cash bonuses were increasingly rare as investment banks paid staff in restricted shares in an effort to tie them in.
Nomura has structured its deal so that the 2008 cash bonus will be divided into two tranches, with the first paid in spring 2009 and the second in the autumn.
“I think it’s attractive,” one banker familiar with the offer said on Thursday. “Most people will be inclined to take it.”
Nomura, which declined to make any comment, this week bought Lehman’s European equities and investment banking operations for an undisclosed sum.
It is taking on about 2,500 ex-Lehman staff, though bankers said about 700 are expected to leave as a result of the integration. The people who leave are expected to receive full redundancy packages.
The bonus offer was negotiated by a group of Lehman’s top bankers in an effort to ensure that the benefits of the takeover were shared by the entire staff.
Bankers said the emphasis was on making sure that as many people as possible kept their jobs.
The negotiations came after Lehman’s US operations were sold to Barclays Capital.
● HSBC on Thursday cut 1,100 jobs at its investment banking arm as the UK bank responded to the market slowdown. The cuts, which include about 500 jobs in London and are equivalent to about 4 per cent of the bank’s global investment banking workforce, reflect its cautious outlook for the market over the next 12 months.
