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Banking bonuses may never be as big again

Following last year's enormous bonuses in investment banks, it was probably always inevitable that bonuses would fall back in 2022. Goldman Sachs already cut pay per head by 36% in the first three quarters of this year compared to 2021, and Morgan Stanley trimmed compensation spending in its investment bank by 16%.

If you work in the worst-performing areas of the market, however, this year's bonus cuts may be more dramatic still. The latest banking bonus forecasts from Wall Street compensation specialist Johnson Associates predicts that 2022 bonuses will fall as follows:

None of this should come as a great surprise. Equity capital markets (ECM) revenues at Goldman Sachs, Morgan Stanley and Deutsche Bank were down 83% this year, so anyone expecting a higher bonus in those teams is probably divorced from reality. In M&A and fixed income trading, though, Johnson's predictions are pretty generic: some M&A teams are having a good year (utility and energy teams/real estate teams/transport teams) and some are not (oil and gas/professional services); in fixed income trading, macro traders are doing well, and credit traders are not. Similarly, some hedge funds (Citadel) are having a good year. Other hedge funds (Tiger Global) are hemorrhaging.

Taken as a whole though, the danger is that bonuses across the financial services industry peaked in 2022 and won't be as good again for very long time. The New York State Comptroller says 2021 bonuses for the New York securities industry were at their highest level since 1992 (when records began) at $257k per head.  By comparison, 2022 will be a year of lower payouts, combined with the falling value of deferred payments from previous years as banks' share prices fall. 24-year-old bankers on "crazy money" may need to recalibrate their expectations, fast. 

Photo by Casey Allen on Unsplash

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AUTHORSarah Butcher Global Editor

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