Bonuses are on track to rise once again for some Wall Street bankers as a dealmaking revival in 2024 boosts profits for the country’s biggest financial institutions.
The biggest paydays will likely go to bankers involved in debt and equity underwriting, as well as traders.
Debt underwriters are likely to see a boost of 25% to 35% in their incentive pay while those who help companies issue equity via initial public offerings are expected to see 20% to 30% bonus pay rises, according to a new report from compensation consulting firm Johnson Associates.
Bonuses in equity sales and trading are expected to increase 10% to 15% from last year. Fixed-income traders and asset and wealth managers should see bumps of 5% to 10%.
These increases that are expected at major Wall Street banks would reverse two disappointing years where deals dried up and bonuses shrank.
Bonuses at major banks fell 20% to 30% in 2022 and remained largely flat through last year, according to Johnson Associates.
But this year investment banking has recovered. The six major banks with sizable Wall Street operations — JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), Morgan Stanley (MS), and Wells Fargo (WFC) — all reported higher revenues in that business during the second quarter.
Stocks for those six big lenders are all up year to date. Goldman Sachs, JPMorgan, Bank of America, and Citigroup have all outperformed an index tracking the sector (^BKX). That index was up 10% as of Friday morning.
However, not all operations at these firms are firing on all cylinders — and that could have an effect on compensation for some bankers.
Those who handle mergers and acquisitions, for example, are expected to see bonuses that are flat to up to 5%, according to Johnson Associates.
There is still uncertainty in that part of Wall Street due to a regulatory crackdown on some mergers, the path of interest rates, and a US presidential election.
Bankers who handle the more traditional tasks of lending to companies and everyday consumers may also see smaller bonuses. Their incentive compensation is expected to be flat to down 5%.
Those more traditional bankers are grappling with a continued industry wide slump in plain vanilla bank lending as well as heightened caution around commercial real estate transactions.
"Second half of year may be more volatile and uncertain" in light of a weaker stock market that could be signaling that the economy is softening, Johnson Associates said in its report.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
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