Wall Street Bonuses Expected to Drop Amid Tough Year for Banks

Wall Street is bracing for a sharp decline in bonuses this year as banks face a challenging operating environment marked by sluggish deal activity, tighter regulations, and economic uncertainty.

Declining Bonus Pools

A report by compensation consulting firm Johnson Associates projects that year-end bonuses in 2024 will drop by an average of 25% across the financial sector. Investment banking divisions, which have been hit hardest by a slowdown in mergers and acquisitions (M&A) and initial public offerings (IPOs), are expected to see bonuses plummet by up to 40%.

Trading desks and wealth management units may fare slightly better, with declines of 10-15% as volatile markets created opportunities for active traders. Still, these reductions are a far cry from the boom years of 2020 and 2021 when Wall Street bonuses reached record levels.

The drop in bonuses comes amid broader cost-cutting measures by major banks. Firms like Goldman Sachs and Citigroup have announced layoffs and restructuring plans in response to declining revenues and rising costs.

While the cuts are disappointing for employees, analysts believe they reflect a recalibration of expectations in a more challenging economic climate. “The era of oversized bonuses driven by easy money policies is coming to an end,” said Alan Johnson, managing director of Johnson Associates.

As Wall Street adjusts to this new normal, the focus is shifting to long-term strategies for growth, including investments in technology, digital transformation, and diversifying revenue streams.