Fleming in bonus bonanza as profits double

MOST of a pounds 61m rise in administration costs at Robert Fleming went on increased bonuses to staff, the merchant banking group said yesterday, after announcing that pre-tax profits doubled to pounds 210m in the year to March.

John Manser, chief executive, said the bonuses were across the board, though higher in some areas than others. Some of the payouts are likely to exceed pounds 1m.

To encourage staff to stay, the bank has established a long-term incentive plan under which an element of a bonus is delayed.

Mr Manser defended the latest in a string of big City bonuses this year, saying they were tied to individual effort and success. He added that everybody in the group was on one month's notice and there were none of the three-year rolling contracts so disliked by institutions.

The bank is not a quoted company, but half its shares are owned by institutions, with another 35 per cent held by family members and 15 per cent by past and present staff.

The profit increase put Fleming second only to Warburg among independent merchant banks in London, and followed the pattern at other banks that benefited from booming markets last year.

Mr Manser said it had been an easy period. 'I doubt whether there has ever been a year in which overall conditions, as far as we are concerned, have been so favourable.'

But he thought people would be surprised by the size of Fleming. If it consolidated its foreign joint ventures, of which the biggest is the majority-controlled Jardine Fleming merchant bank in Hong Kong, pre-tax profits would be equal to, if not more than, Warburg's, Mr Manser said. Warburg made pounds 297m before tax last year.

The group has 6,000 staff worldwide, including those at Jardine Fleming, compared with 4,470 at Warburg. Shareholders' funds of pounds 611m, up 32 per cent, compare with just over pounds 1bn at Warburg. Fleming also disclosed pounds 37.4m hidden reserves, as it is obliged to do under a new European directive.

The results included pounds 78m from dealing profits, twice the level of a year earlier, and Fleming's pounds 80m share of the dollars 202m ( pounds 134) profits of Jardine Fleming, which were up from dollars 76m the year before.

Investment management made record profits, with funds under management 50 per cent higher at pounds 49.5bn. Mr Manser said there had been great strides in investment banking since the recruitment of Bill Harrison as head of corporate finance from Lehman 18 months ago.

Mr Manswer said Fleming had no intention of raising new equity by selling shares on the stock market, because its financial resources were 'more than adequate for what we need'. Expansion would continue to be funded by retained profits, while shareholders were rewarded with a 32 per cent dividend increase.