Warburg trotted out all the usual excuses yesterday. Yes, it is paying top whack by British investment banking standards. Yes, two directors did receive well over a million pounds each last year, and yes, total staff costs did leap by 40 per cent.

But its generosity had to be set against the fact that it is a modest payer by American standards and placed in the context of a 1993 doubling in profits. Or so it insisted.

This defence might have carried more weight if the bank had been able to demonstrate that its buoyant profits were attributable to the investment decisions taken by its highly paid staff rather than the consequence of booming stock markets. Warburg did well last year - but not noticeably better than its peers.

Nevertheless, a new era is dawning for Warburg and perhaps the bank can be forgiven for wanting to kick it off with a bang. Ties to the past are being severed; Henry Grunfeld, the firm's renowned co-founder, 90 years old today, is relinquishing his presidency, just as Lord Cairns limbers up to take over from Sir David Scholey as executive chairman at next year's annual meeting.

At about that time the bank will be beginning to see the fruits - or otherwise - of its new corporate strategy. In the belief that to beat the competition it must have a truly global network, it has been investing heavily in people: its worldwide headcount, including subsidiaries, has risen to more than 5,000 staff. With the capital markets in turmoil, 1994 will be the year in which this considerable workforce, by UK standards at any rate, must prove itself.

This will be no small task, especially given that Warburg's total costs, which rose 32 per cent last year, are set to rise again in 1994/5. Revenues will have to rise even faster if profits are to increase.

The new executive chairman's first challenge will be to demonstrate that he has a structure in place to ensure that he really is rewarding performance rather than simply letting staff costs explode in line with his American competitors.

His second, admittedly harder, task will be to beat those rivals at their own game.