Wall Street bonuses will be getting a serious haircut this year — with as much as 45% shaved off investment bankers’ compensation, an industry expert said.
The paltry payouts are expected to be among the worst in a decade after bankers raked in record highs in 2021 amid a rash of big deals and a dire talent shortage on Wall Street, according to new data from compensation consulting firm Johnson Associates.
Investment banking underwriters — who got the biggest bump in 2021 with bonuses surging 35% amid a jump in mergers and acquisitions — will see the biggest drop this year as deal-making cratered, the firm predicted. Johnson Associates projects bank underwriters will see bonuses slump as much as 45%.
“People thought this might be a more normal year after 2021 but they didn’t expect to see it go so far the other way,” Alan Johnson, of Johnson Associates, told The Post. “This is one of the top two worst years we’ve seen in the last decade.”
Asset management professionals, and those working with ultra higher net worth individuals, will see a decline of around 15% to 20%, the firm said.
Bonuses at large private equity firms are expected to stay largely flat — but may dip as much as 10%.
It’s a dramatic turn of events for an industry that came roaring back to life amid the pandemic. But bonuses mirror the performance of banks — and banks have been struggling this year.
And the pain is amplified as inflation skyrockets.
“This year is different because of inflation,” Johnson said. “It’s one thing for bonuses to be down 20% to 40% but the rampant inflation makes 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 nab bonuses that are 20% higher than the previous year.
Those working at hedge funds — where alternative investments have attracted money — could also bank bonuses as high as 20%.
Equities traders will see a more modest bump of 5% to 10% this year. Fixed-income, which reported disappointing earnings across the board in 2021, is expected to make up for last year’s losses — with traders making 15% to 20% more this year.
Wall Street’s war for talent is also slowing as the era of massive bonuses comes to a screeching halt.
Last year, top banks like Morgan Stanley and Goldman Sachs spent roughly 20% to 25% more on compensation — raising the cost of expenses significantly. This year, they may look to cut back.
“The big question is what will 2023 be like? No one is optimistic,” Johnson said.