Bonuses on Wall Street will fall as deal flow dries up amid turmoil


A warning to investment bankers, who reveled in lavish bonuses for 2021 as banks opened their wallets to reward hard-working dealmakers amid a scramble for talent: Don’t expect a repeat this year.

Incentive pay for those who underwrite debt and equity could fall more than 45 percent this year, while their peers who advise on mergers and acquisitions could see their bonuses plummet 25 percent, according to a closely watched report by compensation consultant Johnson Associates.

“2021 has been a fabulous year and this is a real downer,” said Alan Johnson, managing director of Johnson Associates. “We’ve had bonus declines before, but you’re overlaying that with inflation through the end of the year, and I think it’s going to be particularly painful.”

Investment banking revenue fell 43 percent year-over-year in the first six months of 2022 at the top five Wall Street companies. Persistent inflation, recession fears and global turmoil, including Russia’s invasion of Ukraine, caused wild market swings and kept clients on the sidelines. The battle for bank talent has also cooled as the largest companies become more mindful of their spending.

Equity traders, on the other hand, could see their bonuses jump 10 percent, while their fixed income counterparts could enjoy a 20 percent surge, with the same market turmoil boosting trading earnings.

“This year dealers will be subsidizing some of their investment banking peers,” Mr Johnson said. “You only like that when it comes towards you and doesn’t go away from you.”

Elsewhere on Wall Street, bonuses will mostly be low. Those involved in wealth management could see a 20 percent drop, while wealth managers could see a 15 percent drop, Johnson Associates said. The largest private equity firms could see a 5 percent cut in the performance bonus, while smaller firms could see a 10 percent drop. Bonuses on Wall Street will fall as deal flow dries up amid turmoil

Fry Electronics Team

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