Thought 2022’s banking bonuses were bad? Wait until 2023’s
2022’s bonus season has come and gone with plenty of rain… But little in the way of flooding.
2023's bonuses might be more of a washout. A report from Johnson Associates, the compensation consultancy, has found that bonuses in certain investment banking divisions – M&A and equity capital markets, namely – "may be near decade lows."
There might be an upside, however. Johnson Associates expects debt capital markets bankers to outperform, and for there to be a strong showing (comparatively, anyway) for bonuses in sales & trading. Fixed income traders are expected to see a 10% to 15% bump in bonuses versus 2022 due to increased client activity. Equities traders’ bonuses, meanwhile, will likely stay "flat on steady volumes and client activity."
Johnson thinks commercial bankers will also see a mixed fate, benefiting on the upper end from higher interest rates, whilst regional banks will continue to suffer from the same malaise that brought down SVB, First Republic, and Signature Bank – namely, substantial client outflows. Those same outflows do not evaporate – but head straight to major global banks, providing another benefit (for the majors).
The fate of operations staff bonuses will be down to individual banks more than anything. Johnson Associates notes that major banks with “robust” commercial banking operations will outperform pure play investment banks.
Bonuses aren't likely to be the only way banks will squeeze costs this year. Chris Connors, vice president at Johnson Associates predicts that headcount reductions, "which began in early 2023 are ongoing and may continue throughout the year."
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