Capital markets bonuses will drop 40% as fundraising dries up

Bonuses for capital markets bankers are set to drop 40% this year as deal activity slumps, while a wave of pay rises over the past 12 months will eat away at variable pay, according to a Wall Street compensation consultant.

Traders raising capital markets are set to see the biggest drop in bonuses this year, according to the latest survey from Johnson Associates, while most industries are set to see a sharp drop from 2021, when transaction fees hit a record $130 billion.

Bankers working on M&A deals could see drops of up to 20% from a year ago, the survey predicts. In a reversal of fortune, traders are set to receive a boost this year as the Russian-Ukrainian conflict has led to increased market volatility.

Fixed-income traders could receive 20% more, Johnson Associates predicts, while bonuses for equity traders should increase by 5% to 10%.

Equity capital markets activity fell 71% globally to $177.9 billion in 2022, according to data provider Dealogic. Overall, investment banking fees fell 36% to $28.7 billion.

The battle for top dealmakers is slowing down, said Alan Johnson, founder of Johnson Associates. Financial News.

“Last year, hiring was at a blistering pace and banks had real difficulty finding the people they needed,” he said. “It’s gone from 100mph to 60mph – it’s still hot, but it’s cooled considerably since December.”

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Top Traders Said Financial News that the slowdown in hiring has made it easier to hire staff for banks that still have expansion plans. Lazard chief executive Ken Jacobs said the market has cooled and “this is going to create a lot of opportunities for our business.”

Banks have raised salaries for junior staff in a bid to stem the brain drain of talent amid a burnout crisis, with Bank of America, Barclays, Citigroup, JPMorgan, Morgan Stanley and UBS among those who have increased their salary at least twice in the past year. Wage increases have extended to senior executives at some banks.

“Most banks manage their compensation by adding bonuses and a base salary, so salary increases will have a ripple effect on the overall salary. Bonuses would have gone down anyway, but that’s a double impact this year,” Johnson said.

Corrections and amplifications: In an earlier version of this story, Financial News reported that stock banker bonuses had fallen by 70%. The Johnson report noted that “stock subscription [was] significantly lower (i.e. -70%+)”, which FN misinterpreted as referring to compensation, not income. Johnson has since clarified that this figure was intended to refer to income and that compensation for stock bankers had fallen by 40%.

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