NEW YORK - Banks are poised to hand investment bankers and traders their biggest bonuses since the financial crisis, with hopes the cash will stem the high levels of turnover sweeping across Wall Street.
Equity and debt underwriters will be the biggest winners, with a jump of as much as 35% from a year earlier, according to a report Tuesday by compensation consultant Johnson Associates Inc. Equity traders and M&A bankers may see a 25% increase. Fixed-income traders could be the lone losers, with their bonuses potentially sinking as much as 5%.
"Our clients are going to pay people well" amid concern about employee turnover, Alan Johnson, managing director of Johnson Associates, said in an interview. "The business results are terrific so there's no holding back."
The Covid-19 pandemic was a boon for Wall Street, first with a trading surge on wild market swings and then a deal-making boom. Goldman Sachs, for example, has already posted enough revenue through September to give the firm its best year ever. Rival JPMorgan Chase's revenue haul for the first nine months of the year was the highest it has ever been for that period.
Ever-longer hours have been a theme throughout the pandemic, particularly in investment banking as global transaction values soared to a record. That means that investment bankers pull in about half as much per hour as traders given how much more they work, according to a salary survey from eFinancialCareers.
But banks showed restraint last year when setting year-end bonuses, wary of doling out higher rewards in a pandemic. Now as a second bumper year comes to a close, expectations across Wall Street are high, according to Mike Karp, chief executive officer of recruiting firm Options Group, which plans to release its own compensation report.
"People are expecting Santa will bring a big paycheck in their stocking this year," Karp said in an interview. "But reality is different than perception and some stockings won't be as heavy."
Options Group also predicts compensation will increase for most businesses. Within equity trading, equity-derivatives and prime-finance traders will likely see the biggest jumps -- both more than 20% from a year earlier -- while cash-equities traders could see a 16% gain. On the fixed-income side, commodities, credit and securitised-products traders will see single-digit increases while rates, foreign-exchange and emerging-markets traders will see compensation fall more than 7%, Options Group estimates.
BLOOMBERG