Big Wall Street firms reportedly are preparing to slash year-end bonuses — a sharp about-face from the lavish payouts handed out during the pandemic — as the industry braces for a major slowdown in dealmaking.
Premier banks on Wall Street — JPMorgan, Bank of America and Citi — are planning to cut bonus pools as much as 30% as the economy tightens and layoffs loom after more than two years of industrywide talent shortages, according to a report.
Investment bankers will likely be hit hardest — with their bonuses slashed by as much as a third as banks brace for revenues to plummet as much as 50% in 2023, Bloomberg reported on Friday. Some mid-level and low performers in finance may not get any bonus at all — a painful hit given that most compensation on Wall Street frequently comes from bonuses.
It’s not just underperforming divisions that are facing smaller bonuses. At Goldman Sachs, traders are facing cuts to their bonus pools even though the global markets division brought in $25 billion in 2022 — a 15% increase in revenue from 2021, Bloomberg reported separately on Friday.
Trading executives were informed earlier this week that the size of their bonus pool — which makes up the majority of their compensation — will decrease by “a low double-digit percentage,” the report added.
Some experts predict that bankers could ultimately see bonuses plummet by as much as 45% as financiers face a looming recession, according to data from compensation consulting firm Johnson Associates. It’s a bleak reminder to everyone on Wall Street the economy is in a very different place than last year when Wall Street bonuses were hiked by as much as 35%.
Many on Wall Street are grateful just to hold on to their jobs. Employees at Goldman Sachs, Morgan Stanley and Well Fargo have faced annual culling. Insiders fear the job cuts could be just beginning.
As reported on Thursday by The Post, Morgan Stanley finally succeeded in bringing its employees back to their desks five days a week, but only under the threat of layoffs. The Wall Street giant’s CEO James Gorman said separately on Thursday that the mega-bank was making “modest cuts all over the globe.”
In a note to clients Bank of America analyst Ebrahim Poonawala applauded the move to cut compensation, “Thankfully, David Solomon and team saw the light, made the pivot, and you have to assume that the decision has contributed” to the stock’s outperformance this quarter.
Goldman Sachs, JPMorgan, Bank of America and Citi declined to comment.
For bankers used to raking in eye-popping bonuses as the war for talent pushed salaries to new highs, it will be a disappointing bonus season.
But for compensation experts the cutbacks aren’t a surprise at all.
“Most Wall Street professionals will be quite disappointed and surprised when they receive their year-end bonuses,” Alan Johnson, managing director of Johnson Associates told The Post last month. “For the traditional master of the universe … it’s going to be a difficult year.”
