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2023 bonus expectations, bank by bank

What will your bonus be like for 2023? Based on over 2,000 responses to our bonus expectations survey, the answer is: it depends. 

As we head into the end of the year, the bankers expecting the biggest increase in their bonuses are working for HSBC, followed closely by those at Goldman Sachs. Conversely, the only bankers expecting their bonuses to fall at all on average are working for Bank of America.

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HSBC’s optimism comes from a few sources. For one, bonuses were down in 2022 (the ones paid at the start of 2023) – and at the bank’s Q3 results, it considered an increase in performance-related pay that would increase full year costs by 1%. With around $30bn in costs last year, that could mean an additional $300m distributed as bonuses, which would mean a 9% increase on last year’s $3.36bn bonus pool.

There were some other curious findings. Respondents at Goldman Sachs, for example, are expecting their bonuses to rise nearly 30% this year compared to last. That’s a lot, particularly when you consider that total spending on compensation at the firm was only up by 4.5% in the first nine months of 2023 versus the same period of 2022. Even when factoring in a headcount reduction, compensation per head at Goldman was “only” up 12%.

However, some Goldman bankers and traders were paid comparatively poorly last year and will be hoping that the firm makes amends. Goldman CFO Denis Coleman has said the firm needs to pay its people due to intense competition for their skills from rivals and indicated that compensation spending at the bank will be up in the low single digits for the year. One American Goldman finance VP, responding to our survey, said that there were “whispers that 2022 will be made whole”.

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Other banks form a mixed bag. Barclays’ respondents expect a 16% bonus increase despite rumors of new (and very high) return on equity targets that are likely due to start in February 2024. Why the optimism, then? Most likely, a combination of two factors: firstly, that the banking bonus cap was lifted in the UK, and secondly, that last year’s bonuses were already down 20% from the year before.

Respondents from Morgan Stanley also expected bonuses to go up. Their case might be a bit more clear cut. Although the bank cut 3,500 people this year, its compensation spending was up 1% YoY in its 2023 Q3 results, and outgoing CEO James Gorman has been hinting at pay bumps with statements such as “really high performers are in demand across the street.”

But who are those high performers?

Presumably those who weren’t cut. Bank of America’s respondents expect bonuses to fall, the only major bank respondents to report so. This might be surprising – BofA has performed well compared to peers so far this year. However, it’s also committed to a major hiring freeze in lieu of job cuts, which could stretch the bonus pool significantly. One BofA VP responding to our survey said that he expected bonuses to be down, both due to the recession and the bank’s “commitment to keep all staff.”

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AUTHORZeno Toulon Reporter

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