(Yahoo! Tech) - Wall Street bonuses could jump as much as 35% this year as the financial services sector basks in strong markets and solid revenue growth.
Investment bankers in debt and equity underwriting will see the biggest boost, respectively, booking between 25% to 35% and 15% to 25% growth, according to projections from compensation consulting firm Johnson Associates. Equities sales and trading will also see double-digit bonus increases, with a projected 15% to 20% bump in compensation.
This marks the first time since 2021 that bonuses in the overall finance industry will grow on a yearly basis.
“Wall Street professionals will have something to cheer about when their year-end bonuses arrive,” said Alan Johnson, managing director of Johnson Associates.
But other finance professionals could get little more than a lump of coal in their stockings. Bonuses for real estate finance professionals are projected to remain flat this year, while retail and commercial banking bonuses will be flat or shrink as much as 5%, the report said.
The finance sector has had a blowout year, with major banks beating expectations on strong revenue growth, continued net interest income strength, and favorable projections through year’s end and into 2025.
Big banks, including JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC), and Citigroup (C), are easily outperforming the S&P 500's 28% return. So far this year, major banks are up 42%, and alternative asset managers are up 60%, according to Johnson Associates.
This is helping to drive the bonus growth.
“Firms are in a strong financial position to do what they haven’t been able to do since 2021 — reward their professionals with larger bonuses,” Johnson said.
And banks, particularly investment banks, are preparing for extra windfalls next year from renewed movement in the mergers and acquisitions (M&A) and initial public offering (IPO) spaces.
Lower interest rates paired with less strict regulations under a second Trump administration could drive riskier market moves, which could fuel what have been somewhat sleepy sectors over the last few years.
Goldman (GS) estimates a 20% rebound in M&A activity next year, following a 15% decline this year, the investment bank said in a research note. Goldman also expects a “solid macro environment” for the issuance of IPOs.
“Firms are optimistic about prospects for 2025,” Johnson said. “Banks are looking to extend and improve on the healthy pipeline, specifically for M&A. Assuming markets remain elevated, asset management will benefit as product evolution continues.”
He noted, however, that headcount and efficiencies will continue to be a priority, particularly given the uncertain rate environment.
By Rocio Fabbro
