Banks have begun stockpiling cash to pay out bumper bonuses in the New Year, The Mail on Sunday can reveal.
Documents show Barclays has boosted this year's bonus pool for bankers by 9 per cent to £745million – £63million more than it set aside last year – after making huge profits at its investment bank.
Meanwhile, American investment banks with tens of thousands of British-based staff also appear to be preparing the ground for bigger bonuses.
Writing on the wall: Documents show Barclays has boosted this year's bonus pool for bankers by 9 per cent to £745million
Goldman Sachs, which employs 6,000 in the UK, has set aside $10.8billion (£8.3billion) to cover pay and bonuses in the first nine months of 2020 – up 16 per cent on the same period last year.
Rival Morgan Stanley, which has 5,000 staff in Britain, has set aside $6.8billion to cover pay, up 26 per cent. JP Morgan, with 19,000 UK employees, has put aside an extra 10 per cent to take its total to $9.7billion.
Swiss bank UBS, which has around 5,000 workers in the UK, is handing $30million to 25,000 staff globally as a 'thank you' payment. Each bonus is worth about a week's salary.
Investment banks are flush with cash after pocketing huge fees from helping struggling firms to raise emergency funds.
They have also boosted their income from trading shares and bonds, taking advantage of turmoil on the markets.
Evidence of money being set aside for banker bonuses raises the prospect of lavish rewards being dished out in the City as Covid cripples economies and leads to millions of job losses.
Any move to bump up bonuses could anger UK bank shareholders who have been denied bank dividends since March. Regulators cracked down on payouts to make sure banks could survive a deep economic downturn in which they might face heavy losses on bad debts.
Lord Myners, the ex-City Minister who masterminded bank bailouts during the 2008 crash, said: 'To pay significant bonuses in the knowledge you've got [loan] losses coming would be foolhardy in the extreme.
'In the circumstances of shareholders not getting dividends, it would look even less acceptable for banks to be paying significant bonuses.'
Figures this week are set to show Britain's biggest banks have built up around £13.6billion in extra capital as a buffer against an economic crash, according to analyst estimates.
Banks have so far poised aside around £20billion to deal with bad loans. Regulators are set to decide in the coming months on whether to let banks resume paying dividends.
Myners added: 'There's a misunderstanding in Government about dividends in some way going to fat-cat individuals.
'The dividends not being paid go to pension funds and insurance schemes. There's no need to stop the banks paying dividends. They have strong capital ratios.'
Barclays, like most banks, will finalise its bonus pot at the end of the year. Its investment bank's income from trading shares and bonds has jumped 52 per cent to a record £6.25billion for the first nine months of 2020. The bank also made almost £2billion in fees from helping hard-up firms to call on investors for funds. The corporate and investment bank made profits of £3.2billion.
Jes Staley, chief executive of Barclays, may want to reward his investment bankers to keep them onside as he defends the division from an attack by activist investor Edward Bramson.
The secretive Bramson has called on Barclays to cut the size of its investment bank, while Staley believes it provides an important source of income. But Luke Hildyard, director of the High Pay Centre, warned: 'The pandemic is having a devastating impact. Vast gaps between those at the top and everybody else are not healthy. Huge payouts to already very wealthy bankers would make many people uncomfortable. It might also be complacent to increase bankers' bonuses.'
It is thought bank bosses will show caution around paying dividends until they know the full scale of the downturn.
Staley said: 'The decision around bonuses will be made at the end of the year. We want to do the right things for our customers and our clients.'
HSBC, Lloyds and Barclays are expected to make profits of £3.8billion, £631million and £1.5billion respectively in 2020, while state-backed NatWest is tipped to make a loss of £743million.
Ian Gordon, banking analyst at Investec, said: 'It sounds far fetched, but most of the banks will stay profitable throughout this crisis outside of NatWest.
'I don't think NatWest is likely to pay out a dividend, but all of the others are in a position to pay out.'