Job cuts, smaller bonuses loom for Wall Street bankers

People walk by the New York Stock Exchange on May 12, 2022 in New York City.

Spencer Platt | Getty Images News | fake images

Investment bankers hit with a Collapse in equity and debt issuance this year they’re in line for bonuses that are up to 50% smaller than 2021, and they’re the lucky ones.

Pay cuts are expected across wide swaths of the financial industry as bonus season approaches, according to a report released Thursday by the compensation consultancy. Johnson Associates.

Bankers involved in underwriting securities face bonus cuts of 40% to 45% or more, according to the report, while merger advisers are in line for bonuses that are 20% to 25% lower. Those in asset management will see cuts of 15% to 20%, while private equity workers may see drops of up to 10%, depending on the size of their companies.

“There are going to be a lot of people who are down 50%,” Alan Johnson, managing director of the firm of the same name, said in an interview. “What’s unusual about this is that it comes so soon after a great year last year. That’s on top of high inflation taking a toll on people’s compensation.”

Wall Street is grappling with sharp drops in capital markets activity as initial public offerings slowed to a crawl, the pace of acquisitions fell and stocks had their worst first half since 1970. The timing epitomizes nature. party or famine of the industry, which enjoyed a two year bull market for deals, fueled by trillions of dollars in support for businesses and markets unleashed during the pandemic.

In response, the six largest US banks added a 59,757 employees from early 2020 to mid-2022, according to company documents.

gloomy forecast

Now they can be forced to cut jobs as the outlook for investment banking remains bleak.

“We’re going to have layoffs in some parts of Wall Street,” Johnson said, adding that job cuts could be as high as 5% or 10% of staff. “I think a lot of companies will want their headcount to be smaller in February than it was this year.”

Another veteran Wall Street consultant, Octavio Marenzi of Opimas, said July was even worse than previous months for share issuance, citing data from the Securities and Financial Markets Industry Association.

IPO issuance is down 95% to $4.9bn so far this year, while total equity issuance is down 80% to $57.7bn. according to SIFMA.

“You can expect to hear announcements about layoffs in the coming weeks,” Marenzi said. “There are no signs that things are going to get better in investment banking.”

European investment banks, which have lost market share in recent years to US leaders, including Goldman Sachs Y JPMorgan Chasehe will be the first to give in, Marenzi said.

swiss credit is weighing plans to cut thousands of jobs over the next few years as part of a strategic review, with a potential focus on support roles in the middle and back office, according to Bloomberg. The bank is finalizing its plans for the coming months.

Salary increase

However, the news has not been uniformly bad. Companies will have to increase workers’ base pay by about 5% due to wage inflation and retention needs, Johnson said.

Furthermore, there have been sections of Wall Street that have prosperous in the current environment. High volatility and choppy markets may deter corporations from issuing debt, but it’s a good setup for fixed income traders.

Bond traders and sales staff will see bonus increases of 15% to 20%, while stock trading staff could see increases of 5% to 10%, according to the report. Hedge fund traders with a macro or quantitative strategy could see bonuses increase from 10% to 20%.

Investment banks, hedge funds and asset managers rely on consultants to help them structure bonuses and severance packages by providing insight into what competitors are paying.

Johnson Associates uses public data from banks and asset management firms and proprietary client insights to calculate projected year-end incentives on an employee-adjusted basis.

“My clients realize this is going to be a very difficult year,” Johnson said. “The challenge is how to communicate this and make sure the right people get paid.”

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