Wall Street payouts will be ‘most complicated since Great Recession’: survey
Wall Street’s traditionally top earners are in for a financial reckoning, while less glamourous retail bankers should expect to rake in bigger bucks, according to a new study.
Bank failures, ballooning interest rates and general economic uncertainty have crippled deal-making as companies delay mergers and going public, which fuels the investment banking industry.
Meanwhile, higher interest rates mean more deposits and greater margins on those deposits for banks, which boosts retail banking revenue.
These factors have created an environment where bonuses will be unusually “uneven,” and where this year’s winners and losers are even more pronounced than usual, according to a report from compensation consulting firm Johnson Associates.
“It will be one of the most complicated years in the industry since the Great Recession,” Alan Johnson, managing director of Johnson Associates, told The Post. “Big banks are winning while regional banks are suffering big time.”
“It will be the year of the ‘haves’ and ‘have-nots,'” he added
Johnson predicts the most dramatic divergence in pay will be between those in investment banking advisory and those in retail and commercial banking.
The former could see year-end bonuses drop by 15% to 20% year over year, while the latter may see spikes between 10% to 20%, he said.
“For decades, the masters of the universe were the investment bankers but now they’re the ones getting hit hard,” Johnson said.
Investment banking advisory continues to be in the doldrums as dealmaking and IPOs remain slow.
But investment banking underwriters, who have been raising debt financing, can expect a small pay bump of 5% to 10%, the study said.
Retail deposits have surged at major commercial banks and those higher margins will boost pay.
But for regional bankers – doing similar work at smaller institutions – pay will decline 10% to 20% amid massive outflows of cash, according to the study.
Asset managers can expect a 5% to 10% decline in compensation as some of their clients move money from active investments to more passive investments, the report added.
Fixed income sales and trading will see another big boost as bond yields create more opportunity for profit. But compensation for equity sales and trading is expected to remain flat.
Pay at hedge funds, private equity firms, high net worth firms, and firm management and corporate staff will likely see pay remain constant or increase minimally.
Pay in the financial services industry has whipsawed over the past few years as the economy boomed during the pandemic and then weakened as inflation surged and the Federal Reserve began to hike interest rates.
The average bonus on Wall Street dropped 26% in 2022 and it wasn’t just the year-end bonus that took a hit.
Major banks have been laying off thousands of workers, with Goldman Sachs laying off roughly 3,000 employees earlier this year and Morgan Stanley slashing roughly 3,000 workers this month.
