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 45pc this year, while their counterparts advising on mergers and acquisitions could see their bonuses slump 25pc, according to a closely watched report from compensation consultant Johnson Associates.
"2021 was a fabulous year and this is a real downer," Alan Johnson, managing director of Johnson Associates, said. "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 43pc 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. The battle for banking talent has also cooled, with the biggest companies more mindful of their expenses.
Equity traders, on the other hand, could see their bonuses climb 10pc, while their fixed-income colleagues may enjoy a 20pc increase, with the same market tumult boosting trading revenue.
"This year the traders will be subsidising some of their colleagues in investment banking," Mr 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 20pc drop, while wealth managers may experience a 15pc decline, Johnson Associates said. The largest private equity firms could cut incentive pay 5pc, while smaller firms could see a 10pc decline.