Wall Street bonuses will get a serious haircut this year – with up to 45% off pay for investment bankers, an industry expert says.
The paltry payouts are set to be among the worst in a decade after bankers hit record highs in 2021 amid a flurry of big deals and a severe talent shortage on Wall Street, new data from the consultancy shows. in compensation Johnson Associates.
Investment banking underwriters – who got the biggest raise in 2021 with premiums up 35% amid a jump in mergers and acquisitions – will see the biggest drop this year as deals are collapsing, the company predicted. Johnson Associates predicts that bank underwriters will see their premiums drop by up to 45%.
“People thought it might be a more normal year after 2021, but they didn’t expect it to go that far the other way,” Alan Johnson of Johnson Associates told the Post. “It’s one of the two worst years we’ve seen in the last decade.”
Asset management professionals and those who work with ultra-high net worth individuals will see a drop of around 15% to 20%, the company said.
Premiums for large private equity firms are expected to remain broadly flat, but could fall by as much as 10%.
It’s a dramatic turn of events for an industry that has come back to life amid the pandemic. But bonuses reflect bank performance – and banks have struggled this year.
And the pain is magnified as inflation soars.
“This year is different because of inflation,” Johnson said. “It’s one thing that bonuses are down 20% to 40%, but runaway inflation is making it worse.”
Among the groups that will see better compensation this year is the sales and trading division, which saw profits decline as pandemic volatility slowed in 2021. But now they are capitalizing on market uncertainty – with some fixed income traders expected to get bonuses that are 20% higher than the previous year.
Those who work in hedge funds – where alternative investments have attracted money – could also cash in bonuses of up to 20%.
Equity traders will see a more modest 5% to 10% upside this year. Fixed income, which posted disappointing profits across the board in 2021, is expected to make up for last year’s losses, with traders gaining 15-20% more this year.
Wall Street’s talent wars are also slowing as the era of massive bonuses comes to a screeching halt.
Last year, big banks like Morgan Stanley and Goldman Sachs spent about 20-25% more on compensation, which dramatically increased the cost of expenses. This year they may look to cut back.
“The big question is, what will 2023 look like? No one is optimistic,” Johnson said.