It's not going to be a very merry Christmas for many Wall Street workers this year. According to a forecast by Johnson Associates, year-end bonuses are expected to remain flat or even decrease across various functions in the industry, including deal advisory, bond underwriting, trading and sales, and hedge funds. This can be attributed to a number of factors, including rising interest rates, bank failures, weak deal activity, and overall economic uncertainty.
However, amidst the gloom, there are a few bright spots. Workers in stock underwriting, global retail and commercial banking, and wealth management can expect a modest bump in their year-end bonuses, according to the forecast.
Alan Johnson, from the New York-based compensation consulting firm, said, "Most Wall Street professionals will have to wait another year for a rebound in year-end bonuses. With the financial markets and overall economy struggling to find footing throughout the year, most business segments remain under pressure to keep compensation costs down."
Looking ahead to 2024, Johnson expects another challenging year for Wall Street as it tries to revitalize its deal-making engines. Headcount and staffing models are being evaluated with consideration for lower-than-expected voluntary turnover. While firms aren't implementing salary freezes across the board, they are being more cautious with merit pools.
In conclusion, Wall Street bonuses for 2023 are unlikely to bring much cheer to employees. However, there is hope for some sectors within the industry, while challenges are expected to continue into the following year.
Wall Street Braces for Bonus Cuts as Firms Seek to Trim Workforce
Several firms are considering workforce reductions amid a business slowdown, with Citigroup and Goldman Sachs already taking steps to cut staff^1^. The New York state Comptroller, Thomas DiNapoli, has warned that the overall bonus pool this year is expected to be smaller than in 2022, when bonuses declined by 21%^2^. Despite this, DiNapoli mentioned that the average bonus on Wall Street remained steady, similar to levels seen before the pandemic^2^.
According to the comptroller, Wall Street's profit for the first half of 2023 was 4% lower compared to the same period in 2022^3^. Wall Street bonuses play a critical role in the New York region's economy as they impact various sectors, including restaurants, entertainment venues, luxury goods, and real estate^4^.
Johnson Associates predicts that the investment banking advisory sector will experience the most significant bonus cuts, ranging between 15% and 25%^5^. Regional commercial and retail bankers can expect a decline of 10% to 20% in their bonuses^5^. On a more positive note, workers in equity underwriting may see a modest increase of 5% to 15% compared to last year, albeit still below historical levels. Additionally, employees in global retail and commercial banks could potentially receive a bonus boost of up to 10%^5^.
The forecast suggests that hedge funds, private equity, sales, and staff functions might experience slightly lower or unchanged year-end bonuses^6^.
It remains to be seen how these bonus adjustments will impact the financial industry in the coming months.