(Bloomberg) --Wall Street's dramatic year of dealmaking drought, collapsing banks and job cuts is ending with a mere whimper for traders' bonuses.
At JPMorgan Chase, the overall bonus pool for its legions of traders will be close to flat compared with 2022, according to a person familiar with the matter. That's similar to Citigroup, in the midst of its biggest restructuring in decades, where the pool will likely be little changed if not slightly down, another person said, asking not to be identified discussing private information.
Goldman Sachs and Bank of America are looking to sweeten payouts by at least a few percentage points for many of their traders this year, other people said. Goldman has room to do so after slashing bonuses last year, when it faced both an industry downturn and billions in losses from strategy missteps. Bank of America, meanwhile, eked out more revenue from its markets business, gaining ground on some peers after a weaker performance at the beginning of 2022.
Any such raises are minor exclamation points on one of Wall Street's least volatile bonus seasons in years. Rewards jumped as the Covid-19 pandemic spurred trading and deals in 2020, eventually setting off a war for talent. They then collapsed last year as rising interest rates put a damper on client activity — a malaise that stretched through 2023.
The decisions at individual firms shows almost nobody is escaping the doldrums. Across Wall Street, total trader compensation will probably be about the same as last year, with fixed-income units seeing a 3% bump and those on equity desks facing a 3% cut, recruitment firm Options Group predicted in a report last month.
At Bank of America, individual bonuses for the majority of its traders will range from flat to modestly up, though certain higher performers may see payouts rise by as much as 7%, according to the people familiar. Executives at the second-biggest US bank are discussing rewarding top mortgage and corporate credit traders with even higher pay packages after those businesses performed better.
Chief Executive Officer Brian Moynihan predicted earlier this month that revenue at the trading unit led by Jim DeMare may rise by a single-digit percentage, putting the company on track for its strongest fourth quarter for trading ever.
"They keep gaining market share and they're doing a great job," Moynihan said of his firm's traders in an interview with Bloomberg Television on Tuesday. "We'll keep pushing capital in because it's a great business."
Goldman, which is under pressure to bolster morale after a costly withdrawal from an attempt to build a consumer bank, will probably dole out modest bonus increases as well, another person said.
JPMorgan's revenue from fixed-income trading slipped 1% in the first nine months and fell 15% in equities in the same period. The firm expects its fourth-quarter trading revenue to be "flattish" compared with the year-earlier period, one of the bank's most senior executives, Marianne Lake, told a conference this month.
With banks such as Goldman and Morgan Stanley cutting jobs, and Citigroup's dramatic reorganization, the subtext in many performance reviews may be that a steady bonus is better than none. Some at Citigroup are even being offered the chance to cut and run: The bank is offering to pay a limited number of staff a portion of their bonuses early if they agree to depart, though staffers cannot volunteer for the program.
Representatives at the banks to comment. Bonuses are still under discussion and may change in the coming weeks.
Notoriously Volatile
Wall Street's year-end rewards are notoriously volatile as the industry cycles through booms and busts. When times are good, the windfalls can stretch into millions of dollars — multiples what bankers and traders might reap from salaries.
While banks initially exercised restraint during the pandemic in 2020, the ensuing low interest rates helped drive a deal frenzy and heightened competition for top talent that opened the bonus spigot the following year.
For example, Goldman unfurled bumper bonuses for 2021 and heaped special payouts on top of that for its senior crew of a few hundred partners. But a pullback in Goldman's core business lines and some very firm-specific problems saw profits crater, leaving members of its trading floor to snipe about being handed pay cuts even though they eked out gains in 2022 — a departure at a firm that prides itself on "pay for performance." That's one reason why the firm is considering boosting payouts this year.
M&A Drag
This time, compensation consultants have predicted a harsh year for dealmakers.
After investment banking fees declined for seven straight quarters through the end of September, merger advisers may see their bonuses drop as much as 25%, Johnson Associates Inc. estimated last month. Awards to their counterparts in debt underwriting could drop 10%, with equity underwriting up 5% to 15%.
But the prospect that deals may finally regain some momentum in coming months means employers can't be too stingy, and may lead some to soften the blow.
At Bank of America, Moynihan said this month that its investment bankers are doing slightly better than peers, expecting to mint $1 billion in fees in the final three months of the year. Individuals could receive bonuses that range from down 4% on the prior year to up by that same amount, the people said.
Goldman Sachs is also planning to modestly increase the bonus pool for its investment bankers, some of the people said.
Despite this year's muted bonus pool, top talent will still likely get bonuses that reflect their contributions, according to Sheffield Haworth's Nelson.
"The top performers always find a way to get paid because they are the leader, and they carry the franchise," he said.
