# Banker bonuses go from boom to bust in jarring reversal
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-12-22
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: Bankers in New York and London Face 30-50% Bonus Cuts Amid
Meta Description: Bankers in NYC and London to see big drop in bonuses amid sluggish dealmaking, economic gloom. Recruiters estimate 30-50% decrease or no bonuses at all.
URL: https://financedigest.com/banker-bonuses-go-from-boom-to-bust-in-jarring-reversalhtml

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By Lananh Nguyen, Saeed Azhar and Lawrence White

NEW YORK/LONDON (Reuters) -Bankers in New York and London are bracing for year-end bonuses that recruiters estimate are 30% to 50% lower, while some may receive none at all as dealmaking sputters and economic gloom sets takes hold.

Financiers face disappointment when their compensation awards land in the first quarter, and thousands more of their colleagues could be laid off after hundreds were let go this year, according to recruiters and compensation experts.

Last year, the industry handed out the [biggest awards since 2006 as the economy](https://www.financedigest.com/biggest-economy-in-the-world.html "Biggest Economy in the World") roared back from the pandemic.

But this year, the pace of mergers and acquisitions and stock offerings dramatically slowed as debt financing [markets collapsed and stock market volatility hurt valuations](https://www.financedigest.com/frothy-stock-market-valuations-a-dash-for-cash-and-digital-money-all-on-bank-of-englands-risk-radar.html "Frothy stock market valuations, a dash for cash and digital money – all on Bank of England’s risk radar"). The [outlook for a recession also increased as the year](https://www.financedigest.com/uk-to-avoid-recession-this-year-but-outlook-still-weak-bcc-says.html "UK to avoid recession this year but outlook still weak, BCC says") progressed with the Federal Reserve aggressively raising interest rates to tackle inflation, cooling economic activity.

For U.S. [managing directors](https://www.financedigest.com/anya-libova-joins-apester-as-uk-managing-director.html "Anya Libova joins Apester as UK Managing Director") at Goldman Sachs Group Inc, leaner times will probably translate to a 40% to 45% decline in average compensation for 2022, according to data provided to Reuters by Sheffield Haworth, a recruitment firm for top executives.

At rival Morgan Stanley, average pay for senior bankers is forecast to slide 35% to 40% [according to the report](https://www.financedigest.com/louisiana-floods-to-cost-us-economy-more-than-10bn-according-to-aon-catastrophe-report.html "Louisiana floods to cost US economy more than bn, according to Aon catastrophe report") authored by Julian Bell, Sheffield Haworth’s head of the Americas and Natalie Machicao, a vice president.It’s a head-spinning reversal for dealmakers who racked up record [profits for their firms](https://www.financedigest.com/polish-e-commerce-firm-allegro-eyes-higher-q1-profit.html "Polish e-commerce firm Allegro eyes higher Q1 profit") last year and clinched eye-watering payouts for themselves.

‘Flat’ is once again the new ‘up’ this year, with most people just [hoping not to see a significant cut](https://www.financedigest.com/gazprom-gas-cut-tempers-economic-hopes-after-ukraine-grain-deal.html "Gazprom gas cut tempers economic hopes after Ukraine grain deal") in their compensation given how revenues for the industry as a whole have fallen,” said Stephane Rambosson, London-based cofounder of Vici Advisory, which specializes in hiring senior investment bankers.

At JPMorgan Chase & Co, average total compensation for U.S. managing directors is forecast to drop 35% to 40%, and pay for senior bankers at Citigroup [Inc and Bank](https://www.financedigest.com/token-inc-launches-london-office-to-answer-demand-from-european-banks.html "Token, Inc. Launches London Office to Answer Demand from European Banks") of America Corp will probably shrink by about 35% and 30%, respectively, according to Sheffield Haworth.

While the estimates reflect averages, payouts can vary [widely depending on individual and group](https://www.financedigest.com/euronext-italian-arm-to-become-group-wide-clearer-from-end-2023.html "Euronext Italian arm to become group-wide clearer from end 2023") performance.

The banks declined to comment.

Managing directors at Wall Street banks typically [earn salaries](https://www.financedigest.com/billionaires-salary-how-long-does-it-take-for-them-to-earn-your-wage.html "‘Billionaires Salary: How long does it take for them to earn your wage?’") of $350,000 to $600,000 a year, with bonuses of one or two times their base pay, according to Wall Street Prep, a company that helps aspiring bankers train for the industry. For top performers, [incentive compensation can soar to millions of dollars](https://www.financedigest.com/incentive-fm-secures-new-deal-with-dollar-uk.html "Incentive FM Secures New Deal with Dollar UK").

DEALS PLUNGE

The pay [slump coincides with a decline](https://www.financedigest.com/roche-flags-2023-earnings-decline-on-slump-in-covid-products.html "Roche flags 2023 earnings decline on slump in COVID products") in global equity underwriting of 66%, or $517 billion in deal value, value of mergers and acquisitions sank 37% to $3.66 trillion by Dec. 20, after hitting an all-time high of $5.9 trillion last year, the data showed.

The KBW [Bank Index](https://www.financedigest.com/world-bank-scrapping-ease-of-doing-business-index-is-a-reminder-to-focus-on-fundamentals.html "World Bank scrapping Ease of Doing Business Index is a reminder to focus on fundamentals"), which tracks major U.S. bank stocks, has [slumped about 26% this year](https://www.financedigest.com/stocks-slump-to-2-year-low-as-rates-reality-bites.html "Stocks slump to 2-year low as rates reality bites").

The [slowdown comes](https://www.financedigest.com/uk-house-prices-speed-up-but-slowdown-coming-nationwide-says.html "UK house prices speed up but slowdown coming, Nationwide says") as the U.S. Federal Reserve and other central [banks raise interest rates aggressively to tame inflation](https://www.financedigest.com/be-really-really-careful-on-inflation-bank-of-englands-haskel.html "Be ‘really, really careful’ on inflation – Bank of England’s Haskel"), moves that have curtailed economic activity.

Other risks including [economic uncertainty](https://www.financedigest.com/combatting-economic-uncertainty-in-2023-with-the-payments-sector-2.html "Combatting economic uncertainty in 2023 with the payments sector") spurred by the war in Ukraine, tense U.S.-China relations and snarled [supply chains](https://www.financedigest.com/how-to-bring-immediacy-back-to-the-supply-chain-with-faster-payments.html "How to Bring Immediacy Back to the Supply Chain With Faster Payments") fueled volatility in certain markets.

Traders in fixed income, currencies and commodities (FICC) performed better than their [investment banking](https://www.financedigest.com/investment-banks-trading-revenue-likely-to-shrink-barclays-boss-says.html "Investment banks’ trading revenue likely to shrink, Barclays boss says") colleagues. Compensation for FICC traders will probably rise slightly or stay flat, said Bell at Sheffield Haworth, while stock traders could [see a small drop](https://www.financedigest.com/switzerlands-clariant-sees-slight-sales-drop-in-2023.html "Switzerland’s Clariant sees slight sales drop in 2023").

Barclays’ FICC traders doubled their revenues for the third quarter compared to last year, a bright spot that helped the bank beat expectations [despite rising costs](https://www.financedigest.com/suedzucker-quarterly-profits-surge-73-5-despite-cost-rise.html "Suedzucker quarterly profits surge 73.5% despite cost rise") elsewhere, according its results in October.

Worsening [economic conditions have already prompted firms](https://www.financedigest.com/oil-prices-hold-firm-amid-hopes-for-economic-growth.html "Oil prices hold firm amid hopes for economic growth") including Morgan Stanley and Citigroup Inc, to trim their workforces. After an initial [round of layoffs](https://www.financedigest.com/meta-to-cut-10000-jobs-in-second-round-of-layoffs.html "Meta to cut 10,000 jobs in second round of layoffs") this year, Goldman Sachs is planning to cut thousands of employees in the new year to navigate a difficult environment, a source familiar with the matter said.

In the United Kingdom, most big firms are discussing and allocating bonuses now, with decisions not usually announced until early [next year](https://www.financedigest.com/suedzucker-expects-to-raise-its-sugar-prices-again-next-year.html "Suedzucker expects to raise its sugar prices again next year"). Barclays and [HSBC have already started to trim staff in underperforming areas of investment banking](https://www.financedigest.com/hsbc-acquires-british-arm-of-stricken-silicon-valley-bank.html "HSBC acquires British arm of stricken Silicon Valley Bank").

British banks are also under immense pressure to lift wages for their lower-earning staff in Britain as [soaring inflation](https://www.financedigest.com/hungarys-booming-wedding-market-doused-by-soaring-inflation.html "Hungary’s booming wedding market doused by soaring inflation") erodes household incomes. NatWest offered the bulk of its 41,500 staff in [Britain a pay rise and one-off cash sum after a backlash from lower-paid employees who missed out earlier this year](https://www.financedigest.com/2043-the-year-britain-will-turn-cashless.html "2043: The year Britain will turn cashless").

We expect bonus pools to reduce compared to last year, and there will be no bonuses at some institutions,” said Sophie Scholes, a partner at leadership advisory [firm Heidrick & Struggles](https://www.financedigest.com/firms-struggling-with-the-s-in-esg-should-look-to-social-housing-for-a-blueprint.html "Firms struggling with the ‘S’ in ESG should look to social housing for a blueprint") in London.

A situation that [rewards star performers](https://www.financedigest.com/atelier-residents-reap-rewards-of-top-performing-new-town.html "Atelier Residents Reap Rewards Of Top Performing New Town") over their colleagues “will leave some disappointed,” she said.

(Reporting by Saeed Azhar and Lananh Nguyen in New York, Lawrence White in London; additional reporting by Iain Withers in [London and Emma-Victoria Farr in Frankfurt; Editing by Anna Driver)](https://www.financedigest.com/analysis-frankfurt-stirs-up-euro-clearing-battle-with-london.html "Analysis-Frankfurt ‘STIRs’ up euro clearing battle with London")


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