Wall Street is preparing for higher bonuses for the first time since 2021, with underwriters and traders projected to get the biggest pay boosts for 2024 performance.
Bond market underwriters should see their bonuses jump by as much as 35% higher than last year while those who underwrite stock offerings for companies going public should see an average increase over 15% to 25%, according to compensation consulting firm Johnson Associates.
Traders are expected to get bonuses as much as 20% bigger for the same period.
"We're expecting this to be the second best year in the last five years," Christopher Connors, a principal with Johnson Associates told Yahoo Finance.
"While we're projecting bonuses to go up from 2023, it's not quite a return to the glory days of 2021 on an absolute dollars level," Connors added.
After a record 2021, bonuses across the financial services industry fell sharply in 2022 with underwriters seeing the biggest declines, according to Johnson Associates. Last year, payouts either declined further or remained flat.
But so far this year, investment banking has recovered. Fees earned from equity trading have also rebounded.
The six major banks with sizable Wall Street operations — JPMorgan Chase ( JPM ), Bank of America ( BAC ), Citigroup ( C ), Goldman Sachs ( GS ), Morgan Stanley ( MS ) — all reported higher revenues in that business during the third quarter from a year ago.
Their trading operations were also all higher on the year thanks in large part to their stock trading divisions.
Stocks for those five big banks are all up 35% or more. Goldman Sachs and Morgan Stanley have outperformed an index tracking the sector ( ^BKX ). That index was up 40% as of Tuesday morning.
Bankers at these firms advising on mergers and acquisitions aren't expected to see payouts quite so high. Johnson Associates projects between a 5% to 10% increase for those who work in this area.
While dealmaking in this area has been slower to rebound, Wall Street is very optimistic for how a Republican administration might reduce the friction for deals next year .
Over the past week, US bank stocks have rallied after a decisive win by President-elect Donald Trump.
Investors are hoping that Wall Street financial institutions will earn even higher fees next year with a Republican sweep seen as ushering in a much lighter approach to financial services regulation.
Wall Street pros working in traditional and alternative asset management — a group that includes giants like BlackRock ( BLK ), Blackstone ( BX ), Apollo Global Management (APO) and Bridgewater Associates — are also set for a good year thanks to inflows into funds, ETFs and generally a higher stock market.
their incentive pay rise in respective ranges of between 7% and 12% for traditional money managers, and 5% to 15% within alternatives and hedge funds.
Not all operations at these firms are firing on all cylinders — main street bankers who serve consumers and commercial clients are expected to see their bonuses either remain flat or fall as much as 5% in light of tepid demand for loans.
Those more traditional bankers are still waiting for a rebound in plain vanilla bank lending.
David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.
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