Banking revenue has taken a big hit and as a result, bankers’ bonuses will be about 30% lower for most this year.
- More than $50 billion of banking revenue has been wiped out this year as stock offerings and bond sales are down more than 40% compared to last year, according to Dealogic data.
- Major banks including JPMorgan Chase, Bank of America, and Citigroup are all expected to cut bonus pools by 30%.
- Bankers typically see a large amount of their annual pay come from bonuses so the cutbacks are leading to major disappointments.
Why it’s news
Banking revenue has hit one of the worst declines in history dropping lower than the financial crisis of 2008.
Many banks are having to cut their bonus pools to employees by 30% to 40%—leaving many employees disappointed considering bonuses amass to a large portion of their annual pay.
In a good year such as 2021, an analyst with a $250,000 base salary might earn an additional $350,000 in bonus, for a total annual compensation of $600,000. This year, that bonus might fall to $200,000 to $250,000.
Banks put aside revenue throughout the year to give bankers their bonuses, but revenue was hit hard this year forcing banks to dip into that stash.
Stock offerings and initial public offerings in particular practically disappeared in 2022, so bankers on those deals will see bonuses fall by some 45%, according to projections from Johnson Associates.
Not only are banks looking at cutting bonuses down significantly, they are also looking at making staffing cuts. Considering the large dip in business many banks are looking to cut a significant portion of staff and some have already started doing so.
Goldman Sachs is planning to cut thousands of employees across many divisions, including consumer, investment banking, and trading; and Morgan Stanley has already started cutting employees dropping about 2%, or roughly 1,600, of its staff, according to Wall Street Journal writers David Benoit and AnnaMaria Andriotis.
If banking deals continue to lower and revenue is not built back up more job cuts could be in order for the future.