Getting ranked as a top equity research analyst isn't what it once was. In Institutional Investor's European rankings release this week, Deutsche Bank's research team captured more top slots than any other bank. Trouble is, many were unhappy; a lot were poorly paid, including those who were ranked highly by Institutional Investor, according to headhunters.
"Deutsche Bank seems to have stiffed its equity researchers," said one headhunter, who declined to be named. "I've spoken to a few and it seems there were a lot of zeroes floating around with even top rated analysts receiving terrible payouts.
"Morgan Stanley paid people badly too," he added.
Deutsche Bank did not immediately respond to a request to comment on bonuses for its equity researchers. Another equity research headhunter confirmed that researchers at Deutsche and Morgan Stanley seemed particularly peeved with this year's payouts. "Deutsche and Morgan Stanley zeroed some very very senior people. I've spoken to others whose bonuses have been down 30%," he said. US bankers at Deutsche are said to be especially unhappy.
In the past, headhunters say top equity researchers were paid $1m+. However, pay in the sector has been falling for some time. The 2012 bonus round seems to mark a continuation of the trend.
"There's a long-running debate over whether equity research really generates commissions," says Simon Maughan, head of sector strategy at Olivetree Securities. "We're currently in a phase where people seem to feel that it doesn't, and that if there is a value to research it's capped and that we don't need to be paying researchers hundreds of thousands in salaries and more in bonuses."
Zaki Ahmed at head-hunting firm Financial Search said banks have only been paying good bonuses to equity researchers covering a few top sectors this year. "People working in banks, oils and mining, have been paid. Elsewhere, people have had terrible numbers."
Oliver Rolfe at search firm Spartan Partnership said banks have typically been paying good bonuses to equity researchers working on banking stocks, utilities stocks, oil and gas stocks, and metals and mining stocks, while researchers covering smaller sectors have suffered. However, the situation varies from bank to bank, said Rolfe. "If you want to get paid in equity research, you'll need to be working for a bank that's got a fully aligned offering across your sector - you'll need a strong primary business to bring deals in, research to help support this, and then sales and trading to bring the deals to market," he added. "If you don't have the full offering in this market you are unlikely to generate revenues and won't get paid."
As we've previously reported, banks have been clearing out senior staff to make way for juniors. Headhunters say this is a particular issue in equity research, with people like Alistair Ryan, co-head of banks research at UBS, being let go in recent weeks. Senior researchers like Simon Baker, a senior media analyst at Credit Suisse and Nimrod Schwarzmann, the ex-global head of equity research at RBS have yet to resurface. Nimrod Schwarzmann didn't immediately return a request for comment on his mobile phone.
The number of senior people out of the market is putting pressure on equity research pay, said headhunters. "There are a lot of very good people on the street," said Ahmed.