U.S. financial giant Morgan Stanley has set the tone: after a difficult year for M&A, the UBS rival is reducing the bonuses for investment bankers by up to 15 percent. Pay specialists are expecting even greater decreases at other banks.
On Wall Street, the corporate reporting season has already begun. On Friday, U.S. banking giants J.P. Morgan, Citigroup, Bank of America and Wells Fargo gave an insight into their business development. At the same time, in the most important financial center of the world, the time of bonus payments is looming.
After a year which was marked by a strong decrease in M&A activities, investment bankers now face a challenging compensation review, owing to the deal slump. The bonus policy of UBS rival Morgan Stanley gave us a foretaste of what dealmakers have to expect.
Contradictory Information
According to online platform «Financial News,» Morgan Stanley are reducing the bonuses by 10 to 15 percent (paid article). Reports from those active in the sector confirm that the payouts are focused on well-performing employees, while bonuses for the majority will shrink.
The cuts in bonuses were announced on January 10, directly before the start of the reporting season. This decision comes in contrast to the plans of competitor Goldman Sachs which, according to «Financial News,» intends to increase the compensation pool for dealmakers by up to 10 percent.
Subdued Expectations
In general, however, bankers’ expectations of this year’s bonus round are subdued. Finance data provider Dealogic reports that in 2023, the fees in investment banking dropped by 15 percent globally after an already considerable decrease in 2022.
In contrast, most banks increased bonus payments in 2021, just as earnings reached record highs, in order to recognize the efforts of staff and to hold on to key workers. U.S. compensation experts Johnson Associates forecast that M&A bankers will experience the biggest decline this bonus season, with expected losses of up to 25 percent.
