The Wall St. sign can be seen near the New York Stock Exchange (NYSE) in New York City on May 4, 2021.
Brendan McDermid | Reuters
After a busy and profitable 2021, Wall Street will see its highest bonuses since the Great Recession, according to a report by Johnson Associates.
Booming deal activity, a hot IPO market and soaring stocks mean bankers and traders are waiting for oversized performance-based pay, the report released Tuesday said.
But the strong recovery in business this year has created an unprecedented workload for Wall Street professionals – and a competitive job market as companies prepare to pay a premium to retain top talent and attract new employees.
Companies are “very concerned about sales, although pay will rise significantly,” Alan Johnson, managing director of Johnson Associates, told CNBC.
Johnson Associates used public data from banks and asset management companies, as well as proprietary customer insights, to calculate projected year-end incentives on an employee-adjusted basis. Some investment banks, including Goldman Sachs, publish quarterly earnings reports on how much management has reserved for employee compensation.
Overall investment banking underwriter bonuses are projected to increase by 30% to 35% year over year. For investment banking advisors and stock traders, this jump is estimated at 20-25% year over year. Johnson Associates also forecasts double-digit increases in bonuses for private equity, wealth management and hedge fund roles.
Estimated Bonuses on Wall Street in 2021
| Business area | Projected percentage change from 2020 |
|---|---|
| Investment banking (underwriting) | 30% to 35% |
| Sales & Trading (stocks) | 20% to 25% |
| Investment banking (advice) | 20% to 25% |
| Private Equity (Mega) | 15% to 20% |
| Private Equity (Medium / Large) | 12% to 18% |
| Company management | 12% to 18% |
| Asset management | 12% to 18% |
| Hedge funds | 10% to 15% |
| High net worth | 10% to 15% |
| Staff units | 10% |
| Private and corporate customer business | 5% |
| Sales & Trading (Fixed Income) | Minus 5% too flat |
(Source: Johnson Associates)
The estimated record bonuses, which include cash and stock rewards, come after a pandemic-plagued 2020 year in which activity slowed for many bankers and incentives waned towards the end of the year, although traders benefited from strong trading volumes brought about by the Federal Reserve’s moves to The markets were fueled.
In contrast, “the year’s business results have been excellent,” said Johnson.
Business is expected to remain strong and incentives elevated over the next year, although growth is likely to slow down, according to Johnson.
“I do not think so [bonuses] will go as high next year. … I think that was a leap, “he said.” But the chances are that ’22 will be a really good year. “
Not only will the bonuses rise, but the basic salaries should also rise. While Wall Street has long preferred to reward its workers with performance-based year-end bonuses, the competitive labor market landscape and inflation are driving base salaries higher.
After the increased attention in the junior banker culture this year, companies across the street have raised their salary floors, with Goldman Sachs increasing salaries for their entry-level positions in investment banking from $ 85,000 to $ 110,000.
According to Johnson, base salaries could rise well over 3% and even over 7% across the financial services industry.
“Basic salaries are more important than ever,” he said.
– CNBC’s Hugh Son contributed to this report.
