People walk past the New York Stock Exchange in 2022. May 12 in New York.
Spencer Platt | Getty Images News | Getty Images
Investment bankers struck a collapse of equity and debt issuance expect bonuses this year that are up to 50% lower than in 2021. – and they were lucky.
Pay cuts are expected across much of the financial sector ahead of bonus season, according to a report released Thursday by compensation consultants. Johnson Associates.
According to the report, underwriting bankers are required to take bonus cuts of 40% to 45% or more, while merger advisers want 20% to 25% lower bonuses. Asset managers will see 15 to 20 percent, while private equity workers can see as little as 10 percent, depending on the size of their firm.
“There’s going to be a lot of people who are 50 percent off,” Alan Johnson, CEO of the eponymous company, said in an interview. “It’s unusual that this happened so quickly after the terrible last year. Also, high inflation is starting to catch up to people.”
Wall Street is grappling with a sharp downturn in capital markets activity as IPOs slowed to a crawl, acquisitions slowed and stocks posted their worst first half since the 1970s. This moment epitomizes the feast-or-famine nature of the industry that enjoyed it two-year bull market deals fueled by trillions of dollars in support for businesses and markets unleashed by the pandemic.
In response, the six largest US banks have added together 59,757 employees from 2020 beginning until 2022 middle, according to the documents provided by the company.
Now they can be forced to lay off jobs as the outlook for investment banking remains bleak.
“There will be layoffs in some parts of Wall Street,” Johnson said, adding that layoffs could be as high as 5 percent to 10 percent. “I think a lot of companies will want their headcount to be lower by February than it was this year.”
Another veteran Wall Street consultant, Octavio Marenzi “Opimas” stated that in July equity issuance was even worse than in previous months, according to data from the Securities Industry and Financial Markets Association.
IPO issuance this year fell 95% to $4.9 billion. USD, and the total issuance of shares decreased by 80% to 57.7 billion. according to SIFMA.
“You can expect to hear some layoff announcements over the next few weeks,” Marenzi said. “There are no signs that things are going to get any better in investment banking.
Swiss credit is weighing plans to cut thousands of jobs over the next few years as part of a strategic review focusing on support roles in the middle and back office. Bloomberg. The bank is finalizing its plans over the next few months.
But the news wasn’t all bad. Johnson said companies will need to increase workers’ base pay by about 5% due to wage inflation and retention needs.
And there were parts of Wall Street that have flourished in the current environment. High volatility and choppy markets can discourage corporations from issuing debt, but it’s a good setup for fixed income traders.
Bonuses for bond traders and sales staff will increase by 15-20%, while bonuses for stock traders could increase by 5-10%, the report said. Hedge fund traders with a macro or quantitative strategy may see bonuses increase by 10-20%.
Investment banks, hedge funds and asset managers rely on consultants to help them structure bonuses and severance packages, giving them an idea of what their competitors are paying.
Johnson Associates uses public data from banks and wealth management firms and client insights to calculate expected year-end incentives based on headcount.
“My clients understand that this is going to be a very difficult year,” Johnson said. “The challenge is how you communicate it and make sure the right people get paid.”