Wall Street’s Lavish Bonuses Are Getting Slashed

“It’s been a real shock,” Alan Johnson, managing director of the firm, told me. “I don’t think any of us really appreciated how much the pandemic stimulus created a bubble … now the lights have come on and it’s a little ugly.”

Of course, Johnson says, these firms are still very profitable. “They went from making two tons of money, now they’re going to make one ton of money,” he tells me. “But it’s still a ton of money.”

It’s no surprise that Wall Street bonuses should wax and wane with the fate of the markets. But what’s shocking to Johnson is how fast the tables turned this year. Banks that went on hiring sprees in the boomtimes of 2021 are in a bind now, likely realizing in hindsight they overstaffed. “There will be layoffs — not massive layoffs, but I they’ll certainly be layoffs at the end of the year,” Johnson says.

Of course, no one’s celebrating the prospect of handing out pink slips or scaling back pay. But neither is anyone throwing a pity party for the well-to-do Wall Streeters who are about to get haircut.

“The problems here are of course dwarfed by the problems of people in real world,” Johnson says. “It’s bad when your bonus goes for a $1 million to $600,000, but that’s still $600,000.”

CNN / August 4, 2022

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Analysis: Wall Street Weighs Job Cuts as Deals Slide in Battered Markets

Tough times this year and a “mediocre” outlook for 2023 will prompt investment banks to cut 5% to 10% of their staff and reduce compensation for those who remain, said Alan Johnson, managing director at compensation consultancy firm Johnson Associates.

“They are not going to pay as well,” said Johnson. “People are putting lists together – usually this will begin after Labor Day. With the advantage of hindsight, firms have too many people.”

Reuters / July 26, 2022

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Cost Cuts Loom on Wall Street as Balance of Power with Staff Shifts

“With this steep decline in revenues, there will be lay-offs. Some have already quietly started. And we predict that it’s going to precipitate [accelerate] into the end of the year,” said Chris Connors of Johnson Associates, a pay consultancy in New York. Mayo said M&A advisers are less likely to get axed as companies are still using deals to adapt to a post-pandemic world or to find ways to grow in a downturn.

Financial Times / July 25, 2022

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US Banker Bonuses Set to Drop Following Weak Revenues

Poor first quarter results would currently lead to a 5-10% fall in bonus payouts at commercial banks, according to research from Wall Street compensation consultancy Johnson Associates featured in an S&P Global Market Intelligence report.

The dip comes as a result of global economic factors such as the Russian invasion of Ukraine, rising interest rates, and inflation. According to Johnson Associates, bank revenue has also been hit by these factors leading to a marked decrease in equity underwriting and M&A advisory activity.

The research anticipated bonuses to drop by 35% to 40% by the end of the year. However, the consultancy also predicted that fixed income and equities trading desks could see increases of up to 20% and up to 10%, respectively, due to more client activity.

Banking Exchange / June 1, 2022

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Bonuses at US, European Investment Banks Set to Drop in 2022 on Weaker Revenues

Based on first-quarter revenue and cost trends, incentive funding at major investment and commercial banks is expected to fall by 5% to 10% in 2022, with investment bank underwriting desks seeing declines of up to 40%, Johnson Associates has estimated. Lower revenues will be the main driver of direct decreases in incentive pay, but inflation will make the situation worse, the financial services compensation consulting firm said in its latest sector report.

Following “an unbelievably good year,” underwriting revenues “dropped off a cliff” amid a slowdown in advisory in the first few months of 2022, Alan M. Johnson, managing director of Johnson Associates, said in an interview…

Trading revenues have held up well in the early part of 2022 thanks to greater market volatility, which will be reflected in the changes of incentive pay, Johnson said. While the general trend in 2022 is downward, there will be divergences between banks based on business mix, Johnson said.

S&P Global Market Intelligence / May 26, 2022

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Wall Street Bonuses Could Crater Up to 40% This Year

“For the first time in decades, inflation has a significant impact on real compensation outcomes,” according to the report.

The consumer price index rose 8.5% between March 2021 and 2022, and rising interest rates are putting the brakes on corporate deal making.

The latest figures reported by Johnson represent a dimmer outlook for the year than the firm forecasted in 2021.

“I don’t think [bonuses] are going to up as much next year,” Managing Director Alan Johnson told CNBC in 2021.“But the view is ’22 will be a really good year.”

Banking Dive / May 6, 2022

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