Investment Banking Bonus Briefing: A 2023 Wall Street Update
As the new year unfolds, the financial world turns its eyes to a pivotal event on Wall Street – the annual bonus season. This year, however, the buzz is mixed with a tinge of apprehension. According to a detailed report by Business Insider, the 2023 bonus season is set to be a complex affair, with many banking professionals bracing for potentially modest payouts.
Trends and Predictions: A Second Year of Modest Bonuses
For the second consecutive year, expectations are set for lackluster bonuses. This trend follows a significant decrease in 2022, where Wall Street bonuses fell by an average of 26% from the previous year. The average bonus dropped to $176,700 from $240,400, as per an analysis by New York State Comptroller Thomas DiNapoli. Johnson & Associates, a New York-based compensation consulting firm, anticipates a continued downturn in bonuses for this year, with few exceptions such as equity underwriting and wealth management professionals.
Investment Banking Bonus Schedule
Business Insider has compiled a schedule for the announcement of bonuses across major banks:
- Bank of America: January 26.
- Citi: Second half of January, with specific dates varying by global region.
- Goldman Sachs: After reporting fourth-quarter earnings on January 16, continuing in the following days.
- JPMorgan: The Tuesday after Martin Luther King Day, which is January 16.
- Morgan Stanley: January 10.
- European banks like Barclays and UBS will start communicating bonuses in mid-February.
General Bonus Trend: The overall trend for bonuses in 2023 is not promising, with expectations of them being flat or lower than the previous year. This follows a significant downturn in 2022.
Industry Context: The year 2023 has been marked by widespread layoffs, bank failures, and a cautious economic environment. This has contributed to the restrained bonus forecasts.
Exceptions in Bonus Trends: Some areas such as equity underwriting, retail and commercial banking at larger institutions, and wealth management might see different trends, as per Alan Johnson of Johnson & Associates.
Impact on Employees: The outcome of the bonus announcements can significantly affect employee morale, potentially leading to joy or resentment strong enough to cause a career change.
Reduced Job Openings: Despite the possibility of disappointment with bonuses, there may be less movement of employees between firms due to fewer job openings and increased risk aversion.
Payment Timing: Bonuses are usually deposited into bank accounts a week or two after they are announced.
The broader economic context of 2023 – characterized by layoffs, bank failings, and a slow disinflation process – paints a cautious picture for Wall Street. With fewer job openings and a general atmosphere of risk aversion, as noted by Johnson, the ripple effects of this year’s bonus season are likely to be far-reaching.
As bonus payments are set to hit bank accounts soon after announcements, the financial sector braces itself for the impact of these decisions. This year’s bonus season on Wall Street is a reflection of the broader economic challenges and a pivotal moment for many in the banking industry.