NEW YORK/LONDON, Dec 22 (Reuters) – Bankers in New York and London are bracing for year-end bonuses that recruiters estimate are 30 percent to 50 percent lower, while that some may not receive any as the negotiations and the economic crisis take hold. to hold.
Financiers are facing disappointment as their compensation awards roll into the first quarter, and thousands more of their colleagues could be laid off after hundreds were let go this year, according to recruiters and compensation experts.
Last year, the industry handed out the most important awards since 2006, as the economy rebounded from the pandemic.
But this year, the pace of M&A and equity offerings slowed sharply as debt financing markets collapsed and stock market volatility hurt valuations. Prospects for a recession also rose as the year progressed, with the Federal Reserve aggressively raising interest rates to tackle inflation, cooling economic activity.
For U.S. CEOs at Goldman Sachs Group Inc ( GS.N ), lower times are likely to translate into a 40 percent to 45 percent drop in average compensation by 2022, according to data provided to Reuters by Sheffield Haworth , a senior executive recruitment firm. .
At rival Morgan Stanley ( MS.N ), average pay for senior bankers is expected to fall 35 percent to 40 percent, according to the report written by Julian Bell, head of the Americas at Sheffield Haworth, and Natalie Machicao, vice president. It’s a captivating investment for traders who made record profits for their companies last year and secured spectacular payouts for themselves.
“‘Flat’ is again the new ‘bull’ this year, with most people just hoping not to see a major cut in their compensation given how earnings across the industry have fallen,” he said Stephane Rambosson, co-founder of London. of Vici Advisory, specializing in the recruitment of senior investment bankers.
At JPMorgan Chase & Co ( JPM.N ), average total compensation for U.S. CEOs is expected to fall 35 percent to 40 percent, and pay for senior bankers at Citigroup Inc ( CN ) and Bank of America Corp ( BAC.N ) are likely to be down 35% and 30%, respectively, according to Sheffield Haworth.
Although the estimates reflect averages, payouts can vary widely based on individual and group performance.
The banks declined to comment.
CEOs of Wall Street banks typically earn salaries between $350,000 and $600,000 a year, with bonuses of one to two times their base salary, according to Wall Street Prep, a company that helps aspiring bankers train for the industry. For top performers, incentive compensation can increase to millions of dollars.
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The pay fall coincides with a 66% drop in global equity underwriting, or $517 billion in deal value, with the value of M&A sinking 37% to $3.66 trillion on Dec. 20, after reaching an all-time high of $5.9 trillion last year. , the data showed.
The KBW Bank Index (.BKX), which tracks stocks of major U.S. banks, is down about 26% this year.
The slowdown comes as the US Federal Reserve and other central banks raise interest rates aggressively to control inflation, moves that have dampened economic activity.
Other risks, including economic uncertainty spurred by the war in Ukraine, strained relations between the US and China and stuck supply chains fueled volatility in certain markets.
Fixed Income, Foreign Exchange and Commodity Traders (FICC) outperformed their investment banking peers. Compensation for FICC traders will likely rise slightly or remain flat, Bell told Sheffield Haworth, while stock traders could see a small drop.
Barclays’ FICC traders doubled their revenue in the third quarter compared with last year, a bright spot that helped the bank beat expectations despite rising costs elsewhere, according to its results in October
Worsening economic conditions have already led companies such as Morgan Stanley ( MS.N ) and Citigroup Inc ( CN ) to cut their workforces. After an initial round of layoffs this year, Goldman Sachs plans to cut thousands of employees in the new year to navigate a difficult environment, a source familiar with the matter said.
In the UK, most big companies are discussing and awarding bonuses now, with decisions not usually announced until early next year. Barclays and HSBC have already started cutting staff in underperforming areas of investment banking.
British banks are also under immense pressure to raise wages for their lowest-earning staff in Britain as rising inflation erodes household incomes. NatWest offered most of its 41,500 employees in Britain a pay rise and one-off cash after a backlash from underpaid employees who were made redundant earlier this year.
“We expect bonuses to be reduced compared to last year and there will be no bonuses at some institutions,” said Sophie Scholes, a partner at leadership advisory firm Heidrick & Struggles in London.
A situation that rewards star performers over their peers “is going to leave some disappointed,” he said.
Reporting by Saeed Azhar and Lananh Nguyen in New York, Lawrence White in London; additional reporting by Iain Withers in London and Emma-Victoria Farr in Frankfurt; Editing by Anna Driver
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