Wall Street bonuses are getting a serious haircut this year — with a whopping 45% shaved off investment bankers’ compensation, an industry expert said.
The paltry payouts are expected to be one of the worst in a decade after bankers hit record highs in 2021 amid a spate of big deals and a dire talent shortage on Wall Street, according to new data from compensation consultancy Johnson Associates.
Investment bank insurers — which hit the biggest bump in 2021 with bonuses rising 35% amid a jump in mergers and acquisitions — will see the biggest drop this year as deal-making collapsed, the company predicted. Johnson Associates expects bank insurers to see bonuses fall by as much as 45%.
“People thought this would 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. “This is one of the two worst years we’ve seen in the last decade.”
Wealth management professionals and those who work with high net worth individuals will see a decline of about 15% to 20%, the company said.
Bonuses at large private equity firms are expected to remain broadly flat, but could drop as much as 10%.
It’s a dramatic turnaround for an industry that came back to life during the pandemic. But bonuses reflect banks’ performance – and banks have struggled this year.
And the pain is amplified as inflation skyrockets.
“This year is different because of inflation,” Johnson said. “It’s one thing that bonuses fall 20% to 40%, but rampant inflation makes it worse.”
One of the groups that will see better compensation this year is the sales and trading division, which saw profits fall as pandemic volatility eased in 2021. But now they are taking advantage of the market uncertainty – with some fixed income traders expected to receive bonuses that are 20% higher than last year.
Those who work at hedge funds – where alternative investments have attracted money – can also bank on bonuses of up to 20%.
Stock traders will see a more modest 5% to 10% increase this year. Fixed income, which reported disappointing gains across the board in 2021, are expected to make up for last year’s losses – with traders earning 15% to 20% more this year.
Wall Street’s war for talent is also slowing down as the era of huge bonuses comes to a halt.
Last year, top banks like Morgan Stanley and Goldman Sachs spent about 20% to 25% more on compensation, significantly increasing costs. This year they may want to cut spending.
“The big question is what will 2023 look like? No one is optimistic,” Johnson said.