Bonuses for junior investment bankers in London have increased by as much as 10% on average — sometimes at the expense of their superiors — as firms battle to keep hold of their most talented young staff.

Analysts and associates working at the big US investment banks are the highest-paid in London, according to a report from the recruitment firm Dartmouth Partners, which looked at the mean salaries and bonuses awarded to bankers in the early years of their careers.

Banks across the City are in a war for junior banking talent and have been hiking pay in a bid to prevent an exodus to private equity and non-financial industries. But there is disparity in junior banker pay, meaning some investment banks are in more danger of losing talent than others.

Goldman Sachs, Bank of America Merrill Lynch and JPMorgan kept their juniors happy in the most recent bonus season, according to Dartmouth, while analysts, associates and vice presidents at UBS and Morgan Stanley were the least satisfied with their payouts. Morgan Stanley and UBS declined to comment.

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Most investment banks have kept salaries flat for their graduate recruits. Bankers in their first year of a capital markets or mergers and acquisitions role can expect around £50,000, the same as in 2017, but bonuses have increased across most organisations.

BAML's average bonus payment for its first-year analysts was £41,000, up 46% on 2017. At Morgan Stanley bonuses rose 23% to £32,000, at Goldman 16% to £28,000 and at JPMorgan 4% to £26,000. The smallest first-year bonuses for analysts were paid by Citigroup and UBS, according to Dartmouth.

The increases in pay reflect the growing demand for junior talent, according to Logan Naidu, chief executive of Dartmouth Partners, who said: “In recent years, we’ve seen largely replacement hiring but in 2018 people are very much back into growth mode.”

Naidu added that the demand for analysts, associates and vice presidents at investment banks is the “highest it’s been for a decade” and that banks are resorting to more elaborate retention techniques.

“We’ve seen and heard of plenty of buy-backs, counter offers and in one instance, the first I’ve heard in the last decade, a candidate was offered a double promotion in response to their resignation — though in this case the candidate still chose to leave,” Naidu said.

Juniors bankers have traditionally been expected to work very long hours on, among things, preparing so-called pitch books for deal presentations. Concerns about overworking and burnout have been identified as important contributing factors for those seeking to leave the City.

Banks have responded by offering more time off — sometimes mandatory — better interaction with senior bankers and internal working groups and faster promotions to help address problems.

One senior investment banker said more needs to be done. “We search high and low for the best and brightest people, and then we whip them with PowerPoint and spreadsheets,” he said.

For first-year associates, the next rung on the career ladder from analyst, there was also a disparity in bonus payments between the large investment banks this year, according to the Dartmouth survey. BAML, Goldman and Credit Suisse were the biggest payers, with bonuses of more than £80,000 on average. Barclays and Morgan Stanley, meanwhile, handed out the smallest average bonuses, of £48,000, to first-year associates.

The willingness to make big bonus payments to analysts and associates has led to a higher degree of dissatisfaction among mid-ranking bankers, or vice presidents, according to Naidu, with banks focused on rewarding the top-performing vice presidents.

The Dartmouth CEO said: “If you’re identified as top-ranked, you can expect a sizeable reward and if you’re not then banks aren’t afraid to redirect your hard-earned cash to juniors to try to keep them at the bank.”

Naidu added that VPs are less likely to leave investment banking because their career options are more limited. “Banks aren’t afraid to play hardball,” he said.

To contact the author of this story with feedback or news, email Paul Clarke