Large Wall Street firms are reportedly preparing to slash year-end bonuses — a sharp reversal from the lavish payouts paid out during the pandemic — as the industry braces for a significant slowdown in business deals.
Leading Wall Street banks — JPMorgan, Bank of America and Citi — plan to cut bonus pools by up to 30% as the economy tightens and threats of layoffs after more than two years of industry-wide skills shortages, according to a report.
Investment bankers are likely to be hit hardest — with their bonuses cut by up to a third as banks brace for revenue to fall by as much as 50% in 2023, Bloomberg reported on Friday. Some mid-level and underperforming finance professionals may not get a bonus at all — a painful blow considering most Wall Street compensation often comes from bonuses.
It’s not just underperforming departments that face smaller rewards. At Goldman Sachs, traders are facing cuts to their bonus pools even as the global markets division brought in $25 billion in 2022 — a 15% increase in revenue from 2021, Bloomberg reported separately on Friday.
David Solomon is the CEO of Goldman Sachs CEO.Photo via Getty Images only
Trading executives were informed earlier this week that the size of their bonus pool – which makes up the majority of their compensation – will decrease by “a low double-digit percentage,” the report added.
Some experts are predicting bankers’ bonuses could eventually fall by as much as 45% as financial institutions face a looming recession, according to data from compensation consultancy Johnson Associates. It’s a grim reminder for everyone on Wall Street that the economy is in a very different place than it was last year, when Wall Street bonuses were raised by as much as 35%.
Although more revenue is coming in this year, the dealer bonus pool at Goldman Sachs is getting smaller. Getty Images
JPMorgan, Bank of America and Citi plan to cut bonus pools by up to 30%. Bloomberg via Getty Images
Many on Wall Street are grateful just to be able to hold on to their jobs. Goldman Sachs, Morgan Stanley, and Well Fargo employees were culled annually. Insiders fear that the job cuts could only be the beginning.
As reported by The Post on Thursday, Morgan Stanley finally managed to get its employees back to their desks five days a week, but only under threat of layoffs. The Wall Street giant’s CEO James Gorman said separately on Thursday that the megabank is making “modest cuts around the world.”
In a note to clients, Bank of America analyst Ebrahim Poonawala welcomed the move to cut compensation: “Fortunately, David Solomon and his team saw the light, made the swing, and you have to assume that the decision.” contributed to the stock’s outperformance this quarter.” .
Some experts predict that bankers’ bonuses could eventually fall by as much as 45%. Bloomberg via Getty Images
Goldman Sachs, JPMorgan, Bank of America and Citi all declined to comment.
For bankers accustomed to raking in staggering bonuses while the war for talent has pushed wages to new heights, it’s going to be a disappointing bonus season.
But for compensation experts, the cuts don’t come as a surprise at all.
“Most Wall Street pros are going to be pretty disappointed and surprised when they get their year-end bonuses,” Alan Johnson, chief executive officer of Johnson Associates, told The Post last month. “It’s going to be a difficult year for the traditional master of the universe.”