As we noted the last time Wall Street compensation consultancy Johnson Associates issued a report on the state of banking compensation, 2021’s investment banking bonuses may have been the sort of high watermark that’s reached once in a decade. As revenues fall, it could be a long, long time before bonuses approach that level again.
Johnson Associates have today updated their predictions for banking bonuses in 2022. While sales and trading bonuses are still looking good, the outlook for M&A bonuses has worsened. In May, Johnson thought they’d be down 15% to 20%. Now, a 20% to 25% drop is seen as more likely.
The chart below shows Johnson Associate’s changing prognostication. It’s not just M&A bankers that face a less shiny future: private equity professionals at mega funds are also now thought to face a potential 5% drop in their bonuses. In May, Johnson thought they’d be flat.
The good news is that the tribulations of investment banking divisions don’t appear to be impacting markets divisions, where bonuses are still expected to be up by the same proportions as before. Fixed income salespeople and traders are the most fortunate. Johnson doesn’t split them out by product, but macro traders everywhere stand to receive the biggest increase in their rewards this year – whether they’re in banks or hedge funds.
The worsening outlook for bonuses in investment banking divisions matches woeful revenues in the second quarter. Deutsche Bank’s banking analysts note that equity capital markets fees at US banks declined by an average of 79% year-on-year in Q2; debt capital markets fees were down 50%; M&A advisory fees were down 12%.
Markets revenues were up, however. DB’s analysts say that fixed income currencies and commodities trading revenues were up 25% year-on-year. Equities sales and trading revenues were up 9%.
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