ATOP Wall Street’s largest investment banks, executives are locking in plans to award traders and dealmakers their biggest bonus increases since the pandemic, with 10 per cent hikes – or more – coming for many desks, according to sources briefed on the plans.
At Bank of America, that’s the average increase in store for investment bankers and traders handling stocks and fixed-income products, sources with direct knowledge of the decisions said, asking not to be named discussing personnel matters. At Morgan Stanley and larger rival JPMorgan Chase, bonuses will rise more than 10 per cent for traders, sources familiar with their deliberations said. And for JPMorgan’s investment bankers, bonuses will rise roughly 15 per cent.
Among senior industry executives, it’s broadly expected that Goldman Sachs will go even further for some of its trading desks. Spokespeople for all of the banks declined to comment.
The raises follow two years of industrywide restraint while investment banks struggled to maintain the flurry of trading and dealmaking they handled at the height of the coronavirus pandemic. On most desks a year ago, relatively tepid increases were not enough to keep up with inflation.
Now, managers are planning increases that reflect an upturn in business, as well as some optimism for the year ahead. After all, revenue from trading at the four firms rose less than 10 per cent in last year’s first nine months. Lifting bonuses faster can help ensure that employees stick around for more business to come.
Wall Street’s year-end rewards are notoriously volatile as the industry cycles through booms and busts. When times are good, individual windfalls can stretch into millions of US dollars – multiples of what bankers and traders might reap from salaries.
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The average figures described by insiders do not reflect the sweetest rewards in store for rainmakers, or the disappointment in store for those tagged by supervisors as underperformers.
When the pandemic spread in 2020, Wall Street firms were initially reluctant to pass along their windfalls that could prove temporary. But as competition for talent mounted, they ratcheted up payouts for 2021. Rising interest rates later put the brakes on deals, keeping bonuses in check.
Bank leaders began setting the latest bonus pools late last year, and they have been communicating those decisions to middle managers in recent weeks. The US banking industry is set to start posting financial results next week.
Compensation consultants have predicted for months that investment bankers, traders and asset- and wealth-management professionals would see double-digit increases this round – potentially exceeding 20 per cent in certain lines of business inside broader divisions.
A November report by Johnson Associates, for example, forecast that equity underwriters may get as much as 25 per cent more, with debt underwriters reaching as much as 35 per cent. BLOOMBERG
