Investment bankers at some of Europe's biggest firms are braced for bosses to halve their bonus pools, with an expected jump in payouts for Wall Street's top-performing financiers and traders set to exacerbate a gulf between banks on either side of the Atlantic.
Banks have been calculating bonuses for staff as they prepare to post financial results for 2016.
Wall Street giants JP Morgan and Bank of America are the first to report earnings this week. With US banks again outperforming their European rivals many are expecting the rewards paid at Wall Street firms to dwarf those given to staff at European counterparts, particularly Italian lender UniCredit and Deutsche Bank.
"Frankly we're going to see far more cases of people receiving zero or very low bonuses than we've ever done in the past because for European banks there's going to be far less money around," said Jon Terry, a partner at PwC who specialises in financial services sector pay. He added some staff will receive no bonuses because stretched European banks will use their limited resources to reward and retain their best traders and financiers.
The bonus pools available for employees in the investment banking divisions of some lenders could be halved, he forecast. In contrast, staff at US firms are likely to see their payouts swell by up to 20 per cent.
While Thomson Reuters data last week showed that total global investment banking fees fell 7 per cent to $US85 billion ($122b) in 2016, the top five fee-earning banks were all US firms, led by JP Morgan, which netted $5.8b. This is expected to be reflected in bonuses.
Employees in US banks' fixed income divisions are also likely to do better this year, after firms including Goldman Sachs, Bank of America and Citigroup enjoyed revivals in their bond trading divisions, which had been hit by a market downturn.
In Europe there is still public disquiet about levels of pay at financial services firms, making it harder for banks to hand out rewards on the scale enjoyed on Wall Street.
Scrutiny on pay is increasing in Britain following the publication of the Government's green paper into corporate governance last month.
Adding to pressure on the big banks is the rise of boutique firms such as Robey Warshaw and Centerview Partners, which are increasingly winning lucrative advisory roles on blockbuster deals.
Last week it emerged that Mayfair-based boutique Robey Warshaw had almost doubled profits to 36.6m ($64.69). Among the transactions the small firm worked on was FTSE 100 brewer SABMiller's 79b takeover by rival Anheuser-Busch InBev, the largest deal in British corporate history.