JP Morgan Chase's London bankers scooped almost £2bn in pay and bonuses last year, a reward that will feed the explosive political debate over the role the City should play in Britain's economic recovery.
America's second-biggest bank put aside a total of $9.73bn (£6.13bn) to compensate its investment banking staff, up from $9.33bn in 2009. Around 8,000 of the 26,314 people who work in the division are based in London, giving them about £1.87bn.
Profits at JP Morgan, the only bank to stay in the black throughout the financial crisis, were polished as an improving US economy allowed it to include $7bn it had put aside to cover bad loans. Its (Paris: FR0010370163 - news) credit card and retail banking businesses both enjoyed better performances than in 2009, helping the bank to record profits for the year of $17.4bn.
However, the bonus pool at the investment banking division, which includes its capital markets business, rose despite profits slipping to $6.63bn for the year from $6.89bn.
"Strong results from the banking sector in some way intensify the political pressure on banks," said Peter Dixon, an economist at Commerzbank (CRZBF.PK - news) . "The more the banks earn, the more political pressure they are going to come under."
The prospect of Britain's banks handing out billions of pounds in pay in the coming weeks has exposed political divisions in a Coalition government that will be cutting thousands of public sector jobs this year.
Jamie Dimon, JP Morgan's chief executive, said that while making accurate predictions for 2011 is tough, "you can have a very good year in trading and investment banking". He added that Europe (news) 's ongoing debt crisis has not so far affected the bank, and that it would not be a "fairweather friend" to its clients in countries such as Portugal and Spain.
In the US, analysts were encouraged by the bank's credit card division, which after losing money throughout 2009, generated just over 25pc of the bank's net income for the final three months of the year. JP Morgan's retail banking business made profits of $708m in the fourth quarter compared with a loss of $399m in the same period in 2009.
"Consumer credit continues to improve across the board," said Paul Miller, an analyst at FBR Capital Markets (Berlin: EFM.BE - news) . Overall profits for the fourth quarter climbed 47pc to a record $4.83bn, beating Wall Street's estimates.
Mr Dimon also made clear that JP Morgan will be paying a dividend as soon as the Federal Reserve clarifies how much banks can pay. A lack of dividends and fears over future losses on bad loans left the S&P Financial Index trailing the wider S&P 500 (news) in 2010.
JPMorgan shares rose 0.46 to $44.91.
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