FOCUS-Return of the fat cats? Bank bonuses rise as profits rebound

* Barclays, HSBC among banks topping up bonus pools

* European banks lag Wall Street pay rises

* Hiring market tightest in a decade

* Banks risk backlash over payouts amid pandemic

By Lawrence White and Iain Withers

LONDON, Aug 5 (Reuters) - Europe's banks are stashing cash
to pay bumper bonuses to top performers, amid a deal frenzy
driven by pent up demand from the COVID-19 pandemic and
rebounding bank profits.

Banks have added billions of dollars to bonus pools as they
try to reassure restless staff they will be rewarded in 2021
after a lean 2020.

The planned payouts are more modest than the bonus bonanza
on Wall Street, but European banks nonetheless risk a public
backlash at a time when many businesses and individuals are
still struggling in the pandemic, advocacy groups for fair pay
said.

Britain-based Barclays increased its bonus pool by
46% to 1.1 billion pounds ($1.5 billion), up from 749 million
pounds a year earlier, while HSBC topped up its bonus
pool by $900 million in the first half.

Standard Chartered said a "normalisation of
performance-related pay" during the first half drove an 8% jump
in costs, to $5.1 billion.

Senior bank executives and recruiters said the market is the
most competitive they have seen in a decade, as rebounding
economies worldwide, pent-up demand and the fad for investing
via Special Purpose Acquisition Companies (SPACs) drives
dealmaking activity.

Swiss bank UBS boosted pay for its financial
advisers by $242 million in the second quarter after booking
higher revenues, while Deutsche Bank upped pay and
benefits in its investment bank by 6% compared with the same
period a year ago.

Bonuses and pay increases are likely to continue to build in
the second half of the year, said Sophie Scholes, head of the UK
financial services practice at headhunters Heidrick & Struggles.

"Banks are anticipating that the next bonus round will be
one where they need to pay out, driven by two factors," she
said.

"One is the sheer competition for talent, and that means
retaining good people, and two is that because of all the market
activity people have a good pipeline and some good wins behind
them, and banks are trying to prepare for that."

The trend is global, Scholes said, with banks in Europe and
Asia playing catch-up to the United States.

Goldman Sachs has increased its compensation by $3.5
billion on the prior year, while JPMorgan has added $2
billion.

Goldman has also raised base pay for juniors to $110,000
after rivals such as Morgan Stanley and JPMorgan
increased first-year pay.

This is prompting European rivals to follow suit, with HSBC
this week telling staff it would pay newly hired analysts in its
U.S. investment bank $100,000 a year.

"The U.S. is extraordinary in terms of activity, which comes
from their economic recovery being seen as more robust, and it
has always been a highly acquisitive market in terms of talent,"
Scholes said.

'MORALLY DUBIOUS'

While big payouts are back, in Britain rules that cap
payouts at twice the level of base pay and concerns about public
perception of banker bonuses during a global crisis mean lenders
are showing some restraint.

"Paying out huge bonuses at a time when businesses and
households are struggling and the economic outlook remains so
uncertain is not only morally dubious but financially
irresponsible," said Simon Youel, head of policy and advocacy at
Positive Money.

Youel said much of banks' recent profitability could be
traced to state support measures for the economy. British
newspaper reports have suggested UK banks are lobbying to remove
the cap on bonuses of twice base pay, which Youel said the
government should reject.

The volatile nature of investment banks' revenues means they
must lower variable pay to manage profitability in tough times,
Barclays Chief Executive Jes Staley said, and also pay up when
business is booming.

"When we have in fact delivered very strong revenue growth,
that's reflected in the compensation... we think we are being
prudent in how we manage it," he told reporters last week on a
conference call.

One bank board rejected an executive's rating of their team
as too generous and told them to downgrade it for fear of
otherwise having to pay out too much, Scholes said.

Even traditionally more conservative retail banks are
increasing pay.

Lloyds, Britain's bellwether mortgage lender, said
it would spend an extra 100 million pounds on bonuses this year,
after axing them for all but its lowest paid staff last year.

Bank executives said they would have to keep paying up
despite concerns about public perception.

"We have to reward people," the Chief Executive of a British
bank said, without wanting to be identified. "People have had a
difficult time, and if you've stayed in a role and you've been
locked away and had to go above and beyond, you expect to be
rewarded."
($1 = 0.7189 pounds)
(Reporting by Lawrence White and Iain Withers, additional
reporting by Brenna Hughes Neghaiwi in Zurich and Tom Sims in
Frankfurt. Editing by Jane Merriman)