Wall Street bonuses predicted to fall as much as 45% amid a drought in dealmaking. Here's who will get hit the hardest.

  • 2022 is on track to be the worst year for bonuses since the financial crisis, says Johnson Associates.
  • Some investment bankers could see their checks fall by as much as 45%.
  • The dramatic decline follows bumper bonuses in 2021, which resulted in record pay. 

For Wall Street juniors and executives alike, a huge part of what makes the industry’s gruesome work hours, competitive culture, and break-neck speed worthwhile is the money. 

In addition to starting salaries in the six figures, bankers get fat yearly bonus checks. Last year was especially bountiful, thanks to record M&A and IPO dealmaking, which led to bonuses not seen since before the Great Recession.

But this year, compensation consulting firm Johnson Associates predicts, bonuses will drop by as much as 45% amid a drought in Wall Street’s main business of IPOs and M&A. It’s a fast and steep comedown, said Alan Johnson, managing director of the firm.

“Most people think it’s the worst year since the financial crisis,” he told Insider.

The eight-page analysis, which the firm releases quarterly, is based on a combination of private data from their clients and public data from quarterly earnings results, earnings calls, surveys, news articles, and other sources, the firm said.

Those getting hit the hardest, the company predicts, will be investment banking underwriters — those involved in raising capital through the sale of stocks and bonds, often through IPOs. They can expect to see bonus declines of between 40% to 45%, according to the analysis. 

Johnson Associates pay survey chart
Johnson Associates

Workers involved in M&A and tech should expect to be hardest hit, and face potential layoffs and/or hiring slowdowns because of their “dramatic” declines in deal flow, Johnson said. Meanwhile, those in advisory positions of investment banks won’t be as scathed as their underwriter colleagues — the analysis predicts bonuses down 15% to 20%. 

Second in line on their chopping block is firm management and corporate staff with bonuses slated to decline by 25% to 30%, Johnson said.

“They’re not going to be held harmless this year. If the average senior person is down 20% to 25%, then they’re going to follow in line with everybody else. 

That’s bad news not for CEOs who also pulled in big paychecks last year as they navigated their banks to record profits.  JPMorgan’s longtime CEO Jamie Dimon, for example, pulled in a record $34.5 million for his work in 2021, while David Solomon of Goldman Sachs saw his pay rise to #35 million.   

Other sectors are expected to see moderate bonus decreases. Private equity workers are estimated to see between 5% and 15% bonus decreases, while hedge funds may only have to stomach a 10% to 20% decrease. 

And the one bright spot, according to the analysis, is for fixed-income traders. The analysis predicts their awards could be 15% to 20% more than last year. 

The biggest surprise in this quarter’s analysis for Johnson, he said, was how quickly things have changed. Six or 12 months ago, he said, the hot topics of the industry were the war for talent, the so-called Great Resignation, and employees holding bargaining power over their employers. 

“Now at the end of this year, it’s much colder — pay is down, hiri ng is down,” he said. “Many candidates, they only know what they got paid last year, which was terrific. And the opportunity to make that or make a lot more than that in a new job has shriveled,” he said. “It’s disappointing and has changed really rapidly. And as we look to next year, it’s not looking so great. I think that’s a little surprising.” 

Johnson Associates pay survey graph
Johnson Associates

But that’s the nature of the industry, he added.

“If you’re in banking, if you want to make a career of it, it’s a cyclical business,” Johnson said. “If you’re really good and a little bit lucky, you can have a great career. But if you’re too risk averse or you’re too short term-oriented, it’s probably not going to work out as well.”

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