Some Wall Street bonuses could be nearly halved this year as companies scramble to control costs
Wall Street bankers raked in their biggest bonuses since the 2008 financial crisis last year, setting a new record. This year? Not as much.
That boom in 2021 was short-lived for finance workers, and they could expect year-end bonuses nearly half what they were before, according to a new study.
Bankers who deal with stocks and debt are expected to receive bonuses that are 40% to 45% below 2021 levels, according to a study released Tuesday by Johnson Associates, a compensation consulting firm.
Their hedge fund counterparts, which offer mergers and acquisitions advice, will also see their bonuses shrink, but by a little less — around 15% to 20%.
“The industry was at bubble levels last year,” Alan Johnson, chief executive of Johnson Associates, told Reuters of skyrocketing asset valuations in 2021. “The bubble burst and now we’re hungover.”
There are a few reasons why bankers are taking a hit this year. Mergers and acquisitions slowed in 2022 after booming in 2021, while sluggish fundraising activity and a decline in portfolio company valuations meant lower profits for banks and transaction-related financial services, according to the study.
However, not all finance jobs will lose their usual annual bonuses — in fixed income trading and distribution, bonuses are expected to increase by 15% to 20% year over year in 2022.
However, it’s not just bonuses that are taking the hit in the financial sector. With rising inflation nagging companies around the world, many are laying off employees or withdrawing hiring plans to cut costs, adding to the uncertainty in the industry. Some of the largest banks in the US have already started laying off their employees to manage staff levels amid the deal slump on Wall Street.
Goldman Sachs was the first to start laying off employees in September, followed last week by Citigroup and Barclays, CNBC reported. Morgan Stanley is considering cutting the headcount of its investment bankers in Asia, Bloomberg reported earlier this month.
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