Last 12 months was an unprecedented bonanza for Wall Street bankers — and it was fun while it lasted.
Bonuses for bankers at big financial firms — which hit record highs in 2021 amid a rash of massive deals and a dire talent shortage on Wall Street — are expected to drop as much as 40% in 2022 as bank profits plummet, in keeping with recent data from compensation consulting firm Johnson Associates.
Investment banking underwriters — who got the largest bump in 2021 with bonuses surging 35% amid a jump in mergers and acquisitions — will see the largest drop this 12 months as dealmaking slows. Johnson associates projects bank underwriters will see bonuses slump 35% to 40% — essentially taking bonuses to 2020 levels.
Bonuses at hedge fund and enormous private equity firms are expected to remain largely flat as investors look to those alternative investments amid difficult market conditions. Asset management professionals, and people working with ultra higher net value individuals, will see a decline of around 10% to fifteen%.
“Deals and IPOs are cyclical — we were expecting a hangover for 2022 but it surely’s worse than imagined,” Alan Johnson of Johnson Associates told The Post. “That’s brought deal making to a stop — and on top of that there’s an excellent likelihood we’re going right into a recession.”
Compensation for financiers is anticipated to be plunge dramatically this upcoming 12 months. Getty Images
Johnson is quick to notice that even a minimal dropoff in pay will feel dramatic given record inflation. “If pay is down 15% that’s going to feel like 22% or 23%,” Johnson adds.
It’s a dramatic turn of events for an industry that got here roaring back to life amid the pandemic. But bonuses mirror the performance of banks — and banks have been struggling this 12 months.
Wall Street’s war for talent can be slowing because the era of massive bonuses involves a screeching halt.
Last 12 months top banks like Morgan Stanley and Goldman Sachs spent roughly 20% to 25% more on compensation — raising the associated fee of expenses significantly. This 12 months, they might look to in the reduction of.
“I feel a few of this uncertainty is why firms have been thoughtful and careful about bringing people back,” Johnson adds. “It’s a tricky conversation to have with employees that pay is down and we wish you to commute an hour a day.”
JPMorgan chief Jamie Dimon has signaled the squeeze in profits is probably going here to remain.AP
Goldman Sachs and JPMorgan each reported first quarter profits that were 42% lower than the primary quarter of 2021. JPMorgan chief Jamie Dimon acknowledge the miss and warned there can be “significant geopolitical and economic challenges ahead resulting from high inflation, supply chain issues and the war in Ukraine.”
But as profit dropped across the board, its investment banking fees — which buoyed revenue over the previous few years — which can be down most dramatically.
On the positive side, sales and trading divisions, which saw profits decline as pandemic volatility slowed in 2021, are expected to capitalize on market uncertainty yet again — and a few traders may nab bonuses in 2022 which can be 20% higher than the previous 12 months.
Equities traders will see a more modest bump of 5% to 10% this 12 months. Fixed income, which reported disappointing earnings across the board in 2021, is anticipated to make up for last 12 months’s losses — with traders making 15% to twenty% more this 12 months.