Bankers braced for bleak midwinter

INVESTMENT bankers are facing a bleak bonus season this Christmas. The cash and share pools from which the big City banks dispense largesse to favoured employees are expected to be cut by more than 70%.

Shaun McCarthy, chief executive of City headhunter Jonathan Wren, says: 'Huge bonuses are linked to huge deals, and there aren't any. Younger people are taking a year out to surf and play with dolphins. They plan to come back when the market picks up.'

Among those who have quit investment banking is Henry Blodget, the 35-year-old American analyst whose enthusiastic share tips came to symbolise the dotcom boom and bust. He has left Merrill Lynch to write a book.

The high-rollers of last year, when a total £1.5bn of bonuses was dished out, are unlikely to repeat their good fortune. Winners last time included brothers Michael and Yoel Zaoui, who received up to £5m apiece from Morgan Stanley and Goldman Sachs respectively, and Italian Count Riccardo Pavoncelli, who collected an estimated £3m from Morgan Stanley.

Only a lucky few in profitable areas such as bonds can bank on an increase. Profits at Morgan Stanley, due next week, are expected to be down. Savage cuts are expected at Merrill Lynch, which will reveal its payouts in February. Rival CSFB is also likely to make stringent cutbacks under new boss John Mack 'The Knife'. It is also in talks over paying £70m to settle a case with US regulators for alleged malpractice in high-tech share floats.

'People are trying to offload their Ferraris,' says one investment banker. 'Wives and mistresses might not get a sparkler. You can almost hear the sound of belts tightening.'

Chastened bankers also report cutbacks in Christmas festivities, with firms refusing to lay on lavish amounts of free drink, or even to pick up taxi fares.