NEW YORK, Aug 5 - Bank executives on Wall Street are expected to see the biggest rise in compensation among financial sectors this year, propelled by record revenues from trading and deal-making, according to a report published by Johnson Associates, a financial compensation consultancy.
The consultancy projects that bonuses for equity traders and equity capital markets bankers will climb between 20% and 30% in the current year. Investment bankers involved in mergers and acquisitions are forecast to receive bonuses 15% to 20% higher than last year.
"Most of the excitement is coming from the equity side, with stock markets at record highs and volatility increasing trading volume", said Alan Johnson, the consultancy's founder. He added that "This year will be very good for Wall Street compensation, a 'pleasant surprise', according to Johnson, despite the U.S.-Israeli war on Iran, inflationary pressure and interest rate volatility."
On the fixed income side, executives who trade products tied to bonds and other credit instruments could see bonus increases in the range of 7.5% to 12.5%. Bankers focused on underwriting bonds and arranging loans are expected to have compensation rise by 5% to 10%. Johnson noted that margins in fixed income are lower and that compensation in those areas had already risen in previous years.
The consultancy's outlook for private credit points to muted or negative movement in incentives. Executives in private credit are likely to receive bonuses that are flat to 10% smaller, a trend Johnson links to several fraud cases that triggered large redemption requests from retail clients. That dynamic has constrained compensation in that segment.
Large private equity portfolios are projected to increase bonuses modestly, in a band of 2.5% to 7.5% this year. By contrast, executives at medium-sized private equity portfolios and those working in real estate are expected to see flat incentives relative to prior payouts. Johnson commented that "Private equity is treading water, trying to make profitable exits from companies that were acquired at high prices".
The report paints a differentiated compensation landscape across financial services: outsized gains clustered on the equity side, smaller but positive moves in parts of fixed income and underwriting, and constrained or flat outcomes in segments exposed to recent client redemption pressures or exit challenges. The consultancy's figures reflect current revenue performance and recent shifts in market activity, and they outline where annual bonus pools appear to be expanding versus where they are stagnating.
Key points
- Equity traders and equity capital markets bankers are expected to see the largest bonus increases, rising 20% to 30%.
- M&A bankers are forecast to receive bonuses 15% to 20% higher; fixed income traders and underwriters face smaller gains.
- Private credit may experience flat to 10% smaller bonuses, while large private equity portfolios could raise payouts modestly and medium PE or real estate incentives remain flat.
Risks and uncertainties
- Geopolitical and macroeconomic volatility - The report flags U.S.-Israeli war on Iran, ongoing inflationary pressure, and interest rate volatility as contextual uncertainties that coexist with the compensation outlook.
- Redemption and fraud-related stress in private credit - Fraud cases and consequent large redemption requests from retail clients have pressured private credit incentives.
- Exit challenges for private equity - Difficulty achieving profitable exits for companies bought at high prices may limit bonus growth in private equity.