Wall Street’s Bankers Brace for Big Pay Cuts, but Bosses Don’t Want Whining

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Wall Street bank earnings have never been as depressed as they are this year. Bankers want the bonus to last a little longer.

Fees from advice on trading, stock offerings and bond sales are down more than 40% from this time last year, wiping out more than $50 billion in revenue, according to Dealogic data. This is the biggest year-over-year dollar depreciation on record and worse than during the financial crisis.

Accordingly, executives across the enterprise including:

JPMorgan Chase JPM -0.04%

& Co., Bank of America Ltd.

BACs 0.05%

Citigroup Ltd.

and Jefferies Financial Group Ltd.

Jeff -0.74%

It plans to cut its bonus pool by about 30%, according to people familiar with the Goldman Sachs Group Ltd,

GS -0.63%

Cuts are expected to reach up to about 40%, people said.

IPOs and initial public offerings, in particular, will evaporate in 2022, so bankers on those deals expect bonuses to fall by about 45%, according to forecasts by Johnson Associates, a compensation consulting firm that specializes in the financial services industry. I’m here. The dealmaker said he would see a 20% to 25% cut, the company estimates.

My boss doesn’t want to hear complaints.

Management has been telling bankers to keep a broader view, and 2021 has been a bonanza of activity. , was seen as a validation for building up low-interest debt.

At the time, bank executives warned that this looked like a temporary boom. This year’s decline was more severe than expected.

In a memo to staff earlier this month, Jefferies management said, “Let’s be clear here: ‘Like all companies in this industry, Jefferies is going to have a tougher compensation season this year. I will.”

Management also tells bankers that this year isn’t as bad as they thought. Goldman’s total earnings could be its second-highest year ever, but it’s still going strong.

Goldman Sachs is spending big to bolster its consumer arm, which some bankers blame for the sudden cut in bonuses at the bank.

Wall Street bankers typically receive a large portion of their annual salary as a bonus. Management would set aside earnings throughout the year to build a pool, spending months with each banker to determine how much each was worth. The final pot is decided in the first few weeks of the year as the books are closed, and bankers are usually informed of what they will get in late January.

In a survey of more than 1,000 financial company employees on the professional networking site Fishbowl, nearly 72% said they would consider quitting their jobs at banks if their bonuses were cut.

The news is brighter for traders. Markets are plummeting, but the turmoil caused by rising interest rates has boosted trading volumes, especially in fixed income securities and currencies. Bond traders see him up 10% to 15%, according to Johnson Associates. Equity traders are broadly flat.

Job safety is starting to creep onto our concern list. In the pandemic, banks have swarmed staff to deal with surges in transaction volumes, especially in initial public offerings. They also largely refrained from weeding out underperforming companies.

Now with business down and a possible recession looming, banks are back on cuts.Goldman plans to cut thousands of jobs Across many sectors, including consumer, investment banking and trading, and Morgan Stanley MS -1.01%

recently cut about 2% of its workforce, or about 1,600.

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Underperforming firms are likely to be kicked out during bonus season, bankers said.

A blunt instrument known as a zero bonus is expected to be used more frequently this bonus cycle, some said. method, but bankers and executives say it’s not surprising because those who perform poorly have already been warned.

If IPOs and trading continue to stagnate in 2023, further layoffs are imminent.

Investment bankers in technology, including some managing directors, could be hit hard by the layoffs, according to people familiar with the matter. The tech industry, in particular, has seen a significant decline in products this year, fueled by the pandemic’s stock rally.

“Most of our Wall Street corporate and asset management clients are less optimistic about 2023,” said Alan Johnson, managing director at Johnson Associates.

Write to David Benoit at [email protected] and AnnaMaria Andriotis at [email protected].

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