Wall Street investment bankers can expect much smaller bonuses this year as the economy slows, according to projections published on Tuesday by Johnson Associates Inc, a compensation consultant in New York.
Bankers who underwrite equity or debt offerings are forecast to receive payouts that are 40% to 45% lower than in 2021, while their counterparts who advise on mergers and acquisitions will get bonuses that are 15% to 20% lower than last year.
The plunge in compensation contrasts with a windfall in 2021, when dealmakers brought in bumper profits as markets for buyouts and initial public offerings boomed.
“The labor market went from white hot to very cold, and now we’re having layoffs and hiring freezes,” said Alan Johnson, managing director of Johnson Associates. “It’s been quite a head-spinning turn.”
Bank executives will probably see annual bonus reductions of 25% to 30%, while asset managers will get 20% to 25% less than the previous year, the study showed.
“The industry was at a bubble level last year,” Johnson said, referring to elevated asset valuations that fueled financial markets. “The bubble burst, and now we’re having a hangover,” he said.
Johnson joins New York State Comptroller Thomas DiNapoli in predicting a decline for Wall Street bonuses after last year’s blockbuster.
Goldman Sachs Group Inc began a round of job cuts in September, targeting about 500 people as its third-quarter profit slumped 44%, and other banks also trimmed staff. Morgan Stanley is expected to start layoffs in the coming weeks, sources told Reuters.
Despite the gloom, fixed income traders and salespeople will probably buck the trend, with their bonuses projected to jump 15% to 20%, according to the Johnson Associates study.