A warning for investment bankers who enjoyed lavish bonuses for 2021, when banks opened their wallets to reward busy dealmakers amid a war for talent: don’t expect a repeat this year. 

Incentive pay for those underwriting debt and equity could plummet more than 45% this year, while their counterparts advising on mergers and acquisitions could see their bonuses slump 25%, according to a closely watched report Thursday from compensation consultant Johnson Associates Inc. 

“2021 was a fabulous year and this is a real downer,” Alan Johnson, managing director of Johnson Associates, said in an interview. “We’ve had bonus declines before, but you overlay that with inflation by the end of the year and I think it’s going to be particularly painful.”

Investment-banking revenue fell 43% in the first six months of 2022 from a year earlier at the five biggest Wall Street firms. Persistent inflation, recession fears and global turmoil including Russia’s invasion of Ukraine brought on wild market swings, keeping clients on the sidelines. And the battle for banking talent has cooled, with the biggest companies more mindful of their expenses.

Equity traders, on the other hand, could see their bonuses climb 10%, while their fixed-income colleagues may enjoy a 20% increase, with the same market tumult boosting trading revenue. 

“This year the traders will be subsidizing some of their colleagues in investment banking,” Johnson said. “You only like that if it’s coming toward you, not going away from you.”

Elsewhere on Wall Street, bonuses will be mostly down. Those working in asset management could see a 20% drop, while wealth managers may experience a 15% decline, Johnson Associates said. The largest private equity firms could cut incentive pay 5%, while smaller firms could see a 10% decline. Hedge funds will vary by strategy, with bonuses at equity funds potentially falling 15%. Macro and quantitative firms could provide a rare bright spot, increasing outlays 20% or more.

“Seven-plus months into the end of the year, anything is possible, but it’s very, very unlikely it’s going to make too much of a comeback,” Johnson said. “Wall Street goes up and down -- this is a down year.”

This article was provided by Bloomberg News.