Wall Street bankers, traders may see biggest bonus windfall since 2009

Wall Street bankers, traders may see biggest bonus windfall since 2009

Mark Wilson via Getty Images Dive Brief:

Investment banking underwriters could see their bonuses jump 30% to 35% this year, compared with 2020, adding up to the largest single-year compensation bump since 2009, pay consultancy Johnson Associates said in a report Tuesday .

Equities traders and investment banking advisers may also see a 20% to 25% year-over-year jump in their bonuses, the company said.

A flurry of deals and a fertile crop of initial public offerings have shifted the power dynamic as banks near year-end, when they disburse performance-based incentives. The swell of activity has translated to bigger workloads for Wall Street bankers but also to mounting concerns that top talent may jump to a competitor if the price of perks isn’t right.

Dive Insight:

The expected jump in bonus pay comes a year after several big banks tread cautiously around the idea of boosting compensation amid a pandemic. Bank of America, for example, suggested keeping its 2020 bonus pool flat for sales and trading despite a 20% boost in revenue during the year’s first nine months. Citi kept its pool at 2019 levels last year in equities but gave bond traders a bump of at least 10%. JPMorgan Chase discussed increasing variable compensation by 15% to 20% for traders — in a year when the sector saw a 48% jump in revenue.

Morgan Stanley proved an exception, opting last bonus season to give a one-time $1,000 incentive to most of its employees who earn less than $150,000 a year.

For 2021, Johnson Associates said, the bonus bump should extend well beyond investment banking and equities. Private-equity bankers could see bonuses of 12% to 20% depending on the size of the firm, the consultancy said. Asset-management bankers could see a 12% to 18% bonus bump. Bankers serving hedge funds or high-net-worth clients are predicted to see 10% to 15% jumps in bonuses. Retail and commercial banking positions may see 5% increases, the company said.

This year may prove somewhat of a peak, however, Alan Johnson, managing director of Johnson Associates, told CNBC . While business activity should remain strong in 2022 — keeping incentives relatively high, growth may slow, he said.

"I don’t think [bonuses] are going to go up as much next year. … I think this was a spurt," Johnson told CNBC. "But the view is ’22 will be a really good year."

Recruiting company Options Group gave a slightly less rosy […]

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