As we enter the 2024 bonus season, early compensation data is providing interesting insights into how banks are approaching total compensation in the current market environment. While many major institutions have yet to announce their numbers, initial survey data from over 125 investment banking professionals offers some interesting indicators of where the market might be heading.
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Methodology Note
Before diving into the findings, it’s important to note that this analysis is based on early survey data from respondents across various bank types (Elite Boutiques, Bulge Brackets, and Middle Market firms) and represents a mix of those who have already received their 2024 numbers and those with strong visibility into expected compensation. The data has been cleaned to remove incomplete entries and statistical outliers to ensure more reliable insights.
Key Trends Emerging
1. Modest but Positive Overall Growth
The data suggests a cautiously optimistic compensation environment, with a median year-over-year increase of 5.8%. However, this headline number masks significant variation across levels and institutions. The interquartile range of increases (3.5% to 8.2%) indicates substantial dispersion in how firms are approaching compensation this year.
2. Focus on Junior Talent Retention
One of the clearest trends is the continued emphasis on junior talent retention. Associates are seeing the strongest increases (8-10.5% YoY), while more senior levels are experiencing more modest growth:
- Analysts: +6.5% to +8.5%
- Associates: +8.0% to +10.5%
- VPs: +5.5% to +7.5%
- Directors: +4.0% to +6.0%
- MDs: +3.0% to +5.0%
This pattern suggests banks are particularly focused on maintaining their junior talent pipeline in a market where competition for top young professionals remains robust.
3. Evolution in Deferral Practices
Perhaps the most interesting development is the increasingly sophisticated use of deferrals as a retention tool. The data shows clear “stepping up” of deferral percentages at specific compensation thresholds:
Under 500k:
- Average deferral: ~3%
- Minimal change from 2023
500k-1M:
- Average deferral: ~17%
- Increase of 1.5% from 2023
1M-2M:
- Average deferral: ~27.5%
- Increase of 2.5% from 2023
2M+:
- Average deferral: ~35%
- Increase of 2.5% from 2023
4. Bank Type Differentiation
Early data suggests continuing differentiation between bank types:
- Elite Boutiques: Leading with median increases of 6.5%
- Bulge Brackets: Following closely at 5.8%
- Middle Market: More conservative at 5.0%
Market Implications
For Professionals
The emerging compensation landscape suggests several strategic considerations for banking professionals:
- Junior Bankers: The data indicates continued strong demand for junior talent. Those at analyst and associate levels might find this an opportune time to evaluate their positioning, particularly given the significant differences between bank types.
- Mid-Level Professionals: VPs and Directors face a more nuanced environment. While increases are positive, the growing importance of deferrals at these levels means total compensation structure deserves careful attention.
- Senior Bankers: For MDs, the focus appears to be shifting from year-over-year growth to optimization of deferral terms and platform quality.
For Institutions
The early trends suggest several areas requiring attention:
- Junior Compensation Strategy: With continued focus on junior talent retention, firms may need to regularly benchmark their junior compensation packages.
- Deferral Structure: The clear stepping up of deferrals at specific thresholds might benefit from review to ensure optimal retention impact.
- Competitive Positioning: The growing differentiation between bank types suggests opportunities for strategic positioning in specific market segments.
Looking Ahead
As we await broader compensation announcements across the street, these early indicators suggest a market that is:
- Maintaining focus on junior talent retention
- Becoming more sophisticated in use of deferrals
- Showing increased differentiation between institution types
However, several factors could influence final numbers across the street:
- Deal pipeline visibility for 2024
- Regional economic conditions
- Competitive dynamics in specific sectors
- Regulatory environment
While these early trends provide valuable insights, it’s important to note that many major institutions have yet to announce their numbers. The patterns identified here should be viewed as preliminary indicators rather than definitive market movements. As more data becomes available through the bonus season, we’ll be better positioned to understand whether these initial trends represent broader market shifts or more localized adjustments.
Note: This analysis is based on early survey data and should be considered preliminary. Individual experiences may vary significantly based on firm, role, and performance.
