It's shaping up to be an ugly bonus season for Wall Street bankers, at least when compared to the last few years. As dealmaking has died down with rates rising and Covid liquidity drying up, it looks like the consensus for most bankers will be bonus cuts.
The latest example came from Citi, where it was reported on Tuesday by Bloomberg that investment banker bonuses could see cuts of up to 20%. Directors and managing directors will see cuts between 15% and 20%, the writeup says.
Like most other firms, bonuses are being "skewed toward high performing staff" as the business is overhauled, Bloomberg reported, noting that Citigroup declined to comment.
Recall just days ago we noted that European bankers were also facing bonus cuts amidst a drought of dealmaking. Names like Societe Generale, UBS and Deutsche all have plans to lower their overall bonuses for 2023, we wrote, though some divisions that performed well may still see higher compensation.
Deutsche Bank Chief Financial Officer James von Moltke reportedly said this week that bonus pay will "reflect performance in 2023".
In other words, what have you done for us lately?
“And as you have seen in a number of different areas of the investment banking business in particular in 2023, it has been a difficult market," he added. Revenue at the company's investment bank was down 12% over the first nine months of last year.
UBS saw similar declines, with investment banking revenue falling 7.3% and Societe Generale saw revenues fall 2.5%.
The report notes that investment bankers in the U.S. could see similar drops in their payouts for 2023. In addition to investment banking bonuses falling, traders might also wind up with lower bonuses for the 2023 period.
We wrote back in November 2023 that a survey released by New York-based pay consultancy Johnson Associates found investment bankers (on the advisory side) are expected to see bonuses tumble by 15-25% from a year ago, including both cash and stock-based compensation. Retail and commercial bankers at regional banks could see 10-20% smaller bonuses. And investment bankers in debt underwriting could see their payouts slide by as much as 10%.
"It's another disappointing year, and you overlay that with inflation, people's incomes are down meaningfully," stated Alan Johnson, Managing Director at Johnson Associates, as reported by the Wall Street Journal.
It's the second consecutive year of sliding compensation for Wall Street after record low-interest rates, helicopter money, and juiced-up financial markets sent bonuses to record levels. Global dealmaking has since fallen after peaking at record highs.