Pity Wall Street’s bankers.
Their year-end bonuses are expected to fall by 5 to 10% this year – the first drop since 2011, according to a survey released on Monday. But before you reach for the tissues, realise the average bonus (on top of salary) paid to New York’s 167,800 bankers last year was $172,860. The average US household income last year was $53,657, according to the US Census.
An annual study of Wall Street pay predicts that most bankers will suffer at least a 5% decline in their year-end bonuses, with some sections of the industry suffering falls of as much as 20%. It is the first time that bonuses have fallen in four years, and is caused by falling profits at many of Wall Street’s biggest firms, including Goldman Sachs and Morgan Stanley.
Alan Johnson, managing director of Johnson Associates, the consultancy which conducts the survey, said 2015 had been a “disappointment” and “stressful year”. And he warned bankers, who are still waiting for their pay to rebound to pre-financial crisis levels, that he doesn’t expect their pay to recover for at least another three to five years.
“Given the up and down year Wall Street is experiencing this year, smaller year-end incentives across the industry should come as no surprise,” Johnson said. “The asset management sector in particular is facing strong headwinds, and after several robust years experienced a change in fortune. Investment and commercial banks are struggling through another uneven year with overall year-end incentives to be mostly down with a few exceptions.”
Those working in fixed-income – which before the 2008 financial crisis was the most reliable engine of Wall Street profits – are expected to suffer the biggest decline in their bonuses, with a drop of between 10 and 20%. Hedge fund managers are set to be the next-worst hit, with bonuses down 5 to 15% or more, according to Johnson’s survey, which is based on data from Wall Street’s biggest firms.
The only bankers expected to receive higher bonuses this year are investment bankers, who have benefited from the recent boom in mergers and acquisitions. Their average bonuses are expected to come in 15 to 20% higher thanks to a 60% increase in US M&A activity to $988bn in the first half of 2015 – the strongest first six months of the year since records began in 1980.
Jamie Dimon, chief executive of JP Morgan, was the best-paid banking boss last year, collecting $27.6m, including a $7.4m cash bonus, according to research firm Equilar. The bosses of the world’s 15 biggest banks took home an average of $14.5m in 2014, a 17% increase on 2013.
This article was written by Rupert Neate in New York, for theguardian.com on Monday 9th November 2015 17.18 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010