Investment bankers working on mergers, acquisitions or equity offerings are expected to have their bonuses cut by the biggest proportion on Wall Street this year, compensation consultants Johnson Associates said in a report on Tuesday.
As deals dry up, bonuses for investment bankers are forecast to shrink 10% to 20%, the report predicted, without elaborating on average values for the bonuses. Meanwhile, turmoil in the banking industry sparked by the failure of three regional lenders has sharply divided the outlook for compensation between large and regional commercial banks and retail lenders.
“This will be a confusing year in compensation,” said Alan Johnson, president of the consultancy whose report is closely watched in financial circles. Rising interest rates, economic uncertainty, bank collapses and uneven performance across sectors will further complicate the picture for compensation, he said.
Executives in mid-sized commercial banks will see a drop of between 10% and 20% in their bonuses this year as clients move their deposits elsewhere. Larger banks, by contrast, are expected to raise payouts for commercial bankers by 10% to 20% because they have better conditions for growth.
Elsewhere on Wall Street, compensation is also uneven depending on performance of business segments. Asset management firms are expected to cut executive compensation between 5% and 10% as clients drop higher-fee products and swap out of active equity funds for passive or fixed income investments.
Within investment banking, bankers working in debt capital markets will likely buck the falling trend and receive bonus increases of 5% to 10% as corporate debt markets rebound. Fixed income traders’ compensation will probably rise 10% to 15%.
Compensation for private equity and hedge funds is expected to be unchanged from 2022. Although venture capital deals and initial public offerings have dried up, this has been partially offset by a pickup in private credit and infrastructure investments.