UPDATE 1-UK still seen as key hub for Wall St despite tax hit

(Updates with Citigroup clarification on CFO comments on UK)

* Top five Wall St banks paid $2.3 bln on UK bonus tax

* Morgan Stanley paid out $361 mln, Goldman $600 mln

* Few signs of bankers wanting to leave UK over bonus tax

By Sudip Kar-Gupta

LONDON, July 21 (BestGrowthStock) – Headhunters are confident London
will maintain its position as one of the world’s top financial
centres, in spite of discontent on Wall Street over the one-off
UK tax on bankers’ bonuses for last year.

Wall Street’s top five banks paid out $2.3 billion to the
British Treasury in the second quarter due to the controversial
tax, after Morgan Stanley (MS.N: ) (Read more about the money market today. ) said on Wednesday it would pay
$361 million. [ID:nN19193014]

Goldman Sachs (GS.N: ) said the tax resulted in extra costs of
$600 million. JP Morgan (JPM.N: ) booked $550 million of expenses
from the tax, while Bank of America (BAC.N: ) and Citigroup (C.N: )
both took charges of around $400 million.

The move rankled with certain executives, some of whom were
quite vocal in their opposition to the tax.

JP Morgan is currently dragging its heels on a plan to build
a $3 billion London headquarters, banking and property industry
sources have said, and Chief Executive Jamie Dimon was angered
by the UK tax. [ID:nLDE64K0NK] [ID:nN29131590]

Citigroup has also said that a further UK tax on bonuses
would present it with a difficult choice, although a spokesman
for the bank said on Wednesday it has no plans to quit Britain.

Chief Financial Officer John Gerspach had told reporters on
a conference call last week that if another UK bonus tax were
passed, “We would only have two alternatives, one would be to
pay it, or one would be to move”.

“That’s an alternative that might be years in the making,
but it’s nothing that could be put in place in six months,” he
said.

Headhunters said there was little risk of a mass exodus.

“There’s a threat in terms of internal people wanting to
move over to Asia, but that’s about 2 percent of staff turnover.
It’s not a massive threat,” said Lee Thacker, who works for
executive search firm Sheffield Haworth.

“Fundamentally, can Citigroup move its entire operation from
London to New York? No, of course not. Their revenues would drop
by something like 90 percent,” added Thacker.

TAXING TIMES

Politicians around the world have sought tougher regulation
of the world’s financial industry in the wake of the global
credit crisis, which many blamed on lax banking practices.

Imposing taxes on the sector will also help countries cut
crippling fiscal deficits, as governments grapple with a fragile
economic recovery.

Britain’s “one-off” tax on 2009 bonuses is expected to bring
in about 2.5 billion pounds ($3.83 billion) from overseas and
domestic firms.

Among UK banks, HSBC (HSBA.L: ) said the bonus tax cost it an
estimated $355 million, Barclays (BARC.L: ) paid 225 million
pounds and Royal Bank of Scotland (RBS.L: ) 208 million pounds.

Deutsche Bank (DBKGn.DE: ) set aside 225 million euros ($290.4
million) to pay the tax on bonuses in London.

While the new Conservative/Liberal Democrat coalition
government has stepped back from reintroducing the bonus tax,
Britain has joined France and Germany with a further levy on
banks’ balance sheets, which the UK hopes will raise 2.5 billion
pounds annually by 2013/2014. [ID:nLDE65L1L7]

British Prime Minister David Cameron was due to meet various
leading American financial executives in New York on Wednesday
to discuss the attractiveness of investing in London.

Tony Deacon, who works at headhunting firm Emerald Group,
said London’s advantageous geographical position between the
Americas and Asia meant it remained a top choice for ambitious
financiers who could deal with both Tokyo and New York during a
working day.

“Based in London, you can get a bit of the Americas and a
bit of Asia. London really is the centre,” he said.

Simon Vaughan-Edwards, managing director at headhunting firm
Correlate Search, added that few of the people he dealt with had
expressed any major concern over the bonus tax.

“There’s a great deal of noise at the political level but as
regards individuals, we have seen little impact on overall
remuneration of senior bankers,” he said.

“We were preparing ourselves for an outflow of talent to
places like Switzerland last year, but it never came.”

Table of the Q2 cost to Wall St banks from UK bonus tax:

GOLDMAN SACHS — $600 MLN

JP MORGAN — $550 MLN

CITIGROUP — $404 MLN

BANK OF AMERICA — $400 MLN

MORGAN STANLEY — $361 MLN

TOTAL — $2.32 BLN

($1=.6534 pounds)
($1=.7748 euros)

Investing Tools

(Additional reporting by Matt Falloon and Maria Aspan; editing
by Simon Jessop, Greg Mahlich)

UPDATE 1-UK still seen as key hub for Wall St despite tax hit