Wall Street’s dealmakers may see bonuses for 2022 drop as much as 40% as initial public offerings and underwriting businesses continue to slow.
That’s according to the latest projections by Alan Johnson, managing director of the compensation consultancy Johnson Associates Inc. This year’s once-in-a-generation levels of inflation will also weigh on pay, Johnson said Thursday in a report.
“For the first time in decades, inflation has a significant impact on real compensation outcomes,” he said.
Rising interest rates and the ensuing increase in borrowing costs are hindering deals, while volatility has sapped the market for equity underwriting. As a result, Johnson predicted that dealmakers will see bonuses fall as much as 20%, and underwriters may see drops as big as 40%.
Traders, on the other hand, have been feasting on the volatility, which has buoyed volume and helped revenue at Wall Street’s biggest banks. Equities traders may see their incentive compensation rise as much as 10% while fixed-income traders could see jumps as high as 20%.
To be sure, predictions about where banking businesses will finish out the year are bound to change between now and December, as monetary-policy decisions play out and uncertainty about the war in Ukraine continue to sway markets.
With lenders looking to keep a lid on costs, many will probably seek to keep headcount flat rather than beefing up their ranks, Johnson said.
The “war for talent will slow” and headcount may even decrease as firms look to control expenses in a down year, Johnson said, adding that it’s a “challenging year as employers grapple with negative impact from return to office, high inflation and lower incentives.”
This article was provided by Bloomberg News.