Wall Street companies are anticipated to offer larger bonuses this year, marking the first increase since the exceptionally profitable year of 2021, according to a recent report by compensation consulting firm Johnson Associates.
This expected rise in payouts is attributed to favorable conditions that have benefited financial institutions in recent months, including a resurgence in merger and acquisition activity, the Federal Reserve’s decision to lower interest rates and stock markets reaching unprecedented highs, the firm’s founder Alan Johnson stated.
The report indicates that debt underwriting specialists in investment banking are expected to see the most significant bonus increases for 2024, ranging from 25% to 35%. Professionals in equity capital markets are also likely to benefit, with projected bonus hikes of 15% to 25%.
Market turbulence and bullish stock performance are set to bring substantial rewards for traders. Those specializing in equity sales and trading are forecasted to see their bonuses increase by 15% to 20%. Fixed income traders can expect more modest gains, with bonuses likely to rise between 5% and 10%. In the mergers and acquisitions sector, a gradual recovery is anticipated to result in relatively conservative bonus increases of 5% to 10% for deal advisors.
However, the consultancy points out that this upward trend in bonuses won’t be universal across the banking sector. Specifically, retail and commercial bankers are unlikely to benefit from these positive developments. Their bonuses are expected to either remain unchanged or potentially decrease for the year.
On Wall Street, year-end bonuses serve as a crucial barometer of both employee and corporate success, based on a worker’s personal contributions, their ability to foster key relationships and their overall impact on the firm’s performance, as well as broader metrics such as companywide results and market conditions.
Why The Boost?
Wall Street experienced a significant upswing in the first half of the year, with pre-tax profits soaring to $23.2 billion, marking a 79.3% increase compared to the same period last year, according to the annual securities industry report by New York State Comptroller’s office. If this growth trajectory continues, the industry could potentially see total profits exceeding $47 billion for 2024, as projected in the comptroller’s report.
This projected increase would be a positive development following the industry’s performance in recent years. While 2023’s annual profits of $26.3 billion slightly surpassed 2022’s $25.8 billion, they fell considerably short of the figures seen in 2020 ($50.9 billion) and 2021 ($58.4 billion). Those banner years were characterized by low interest rates and abundant liquidity in the economy, fueled by federal stimulus measures.
In the first half of the year, Wall Street firms raised their compensation costs by 9.8%.
“This year has been very strong so far and profits may continue their upward trajectory, to exceed 2023 levels and boost state and city tax revenues,” New York State Comptroller Thomas P. DiNapoli said in a statement. “Still, there are many international and domestic uncertainties that pose risks to the industry in the final months of 2024 that my office will be monitoring closely.”
Wall Street Jobs
Last year, New York had 214,900 jobs in the securities sector, which is more than double the number in California, its rival hub. However, the OCC pointed out that New York has been losing jobs to other states for decades, with employment in Texas and Utah growing at a faster rate. Currently, New York represents 174% of the total securities industry workforce in the country.
While its securities sector reached 198,500 jobs in 2023—the highest figure since 2000—preliminary data for this year indicates a decline of 3,400 jobs based on year-to-date statistics through August, according to the comptroller’s office.