Job cuts, smaller bonuses loom for Wall Street bankers, consultant says


People walk by the New York Stock Exchange on May 12, 2022 in New York City.

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Investment bankers hit with a collapse in equity and debt issuance this year are in line for bonuses that are up to 50% smaller than 2021 — and they are the lucky ones.

Pay cuts are expected across wide swaths of the financial industry as bonus season approaches, according to a report released Thursday by compensation consultancy Johnson Associates.

Bankers involved in underwriting securities face bonus cuts of 40% to 45% or more, according to the report, while merger advisors are in line for bonuses that are 20% to 25% smaller. Those in asset management will see cuts of 15% to 20%, while private equity workers may see declines of up to 10%, depending on the size of their firms.

“There are going to be a lot of people who are down 50%,” Alan Johnson, managing director of the namesake firm, said in an interview. “What’s unusual about this is that it comes so soon after a terrific year last year. That, plus you have high inflation eating into people’s compensation.”

Wall Street is grappling with steep declines in capital markets activity as IPOs slowed to a crawl, the pace of acquisitions fell and stocks had their worst first half since 1970. The moment epitomizes the feast-or-famine nature of the industry, which enjoyed a two-year bull market for deals, fueled by trillions of dollars in support for businesses and markets unleashed during the pandemic.

In response, the six biggest U.S. banks added a combined 59,757 employees from the start of 2020 through the middle of 2022, according to company filings.

Gloomy forecast

Now, they may be forced to cut jobs as the investment banking outlook remains gloomy.

“We will have layoffs in some parts of Wall Street,” Johnson said, adding that job cuts may amount to 5% to 10% of staff. “I think many firms will want their headcount to be lower by February than it was this year.”

Another veteran Wall Street consultant, Octavio Marenzi of Opimas, said that July was even worse than the preceding months for equities issuance, citing data from the Securities Industry and Financial Markets Association.

IPO issuance has plunged 95% to $4.9 billion so far this year, while total equity issuance has fallen 80% to $57.7 billion, according to SIFMA.

“You can expect to hear announcements regarding layoffs in the next few weeks,” Marenzi said. “There is no indication that things are about to improve in investment banking.”

Salary bump

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