Wall Street's bonuses—aka the ultimate measure of all that is important and worthy in finance—might be shrinking for many a banker this year. That's the dismal news from Johnson Associates, a compensation consulting firm, which released its annual survey on the matter on Monday.
Before the bad news, the good: Investment bankers are doing just fine. After a year of heightened merger-and-acquisition activity, their end-of-year bonuses are expected to rise 5 percent to 15 percent. Bankers in private equity and asset management can expect to see their payouts climb by a similar range. But for everyone else, the trend is down. According to the Johnson Associates report, bankers and traders in stocks and bonds could see their bonuses fall by up to 10 percent. In retail and commercial banking, the sums will likely stay flat. Even hedge funds might be paying 10 percent less in bonuses this year.
While Johnson Associates doesn't release specific figures with its report, a spokesman said that, generally, a managing director in investment banking with 10 or more years of experience could expect a bonus package of $500,000 to $1 million this year. For a vice president of investment banking, the total bonus could fall between $200,000 and $400,000.
Over at DealBook, Nathaniel Popper notes that the trends in bonuses could mean regulators are getting what they want. More sedate sectors of finance—asset management and private equity—are hauling in the big bonuses, while the higher-risk ones are not.
The changing fortunes on Wall Street are largely consistent with what regulators hoped to see in the wake of the financial crisis. New rules have discouraged banks from doing the sort of risky trading that used to result in big profits.
The regulations have instead encouraged banks to emphasize businesses that serve clients, such as wealth management and deal-making. These more staid business units do not require the banks to put any of their own money at risk.
The decline in bonuses also isn't too surprising considering the other tepid tidings from Wall Street this year. While banks implemented "protected weekends" for junior bankers and salaries inched up for those employees, many big banks have laid off workers this year. Goldman Sachs said in its third-quarter earnings that it had decided to set aside less money for employee compensation. And just last week, JPMorgan announced that it would cut thousands more jobs in both mortgage and retail banking than it had previously expected. All in all, not a great year.