By Tatiana Bautzer
NEW YORK (Reuters) -Wall Street bonuses are expected to rise for the second year for traders and investment bankers on surging deal volume and market volatility, according to financial compensation consultancy Johnson Associates.
The bonus pool is expected to be the highest since 2021, when deals and profits surged to a record. Equity sales and trading professionals are expected to get the biggest bonus bumps of 15% to 25%, while investment bankers in M&A advisory and equity underwriting will likely get increases of 10% to 15%.
“Markets are at record valuations and there is a large pipeline of deals that were paralyzed and now are getting released,” said Alan Johnson, managing director of Johnson Associates.
VOLATILITY BOOSTS TRADING DESKS
Tariffs introduced by U.S. President Donald Trump this year fueled market volatility, buoying trading desks. As the deal environment improved in the second and third quarters, banks ramped up hiring of senior investment bankers.
Incentives for financial professionals in hedge funds, private credit, insurance, retail and commercial banking are projected to rise by as much as 5% to 10%.
The boom times may fade next year if the economy slows and credit and investment deteriorate, Johnson predicted.
Financial firms are expected to reduce up to 20% of their workforce over the next five years, largely because of artificial intelligence. The headcount reductions will initially reduce the number of entry-level employees, but eventually affect mid-level operational roles.
“Everyone is now trying to understand how this dynamic will affect financial careers,” Johnson said. With a smaller group of junior employees, the pool for promotions will be smaller.
Salary increases are expected to significantly slow this year to an average between 3% and 3.5%, Johnson said.
“Companies are focused on keeping costs down, have slowed hiring and will start cutting headcount due to AI,” posing challenges for employees trying to secure larger pay increases, he said.
EXPECTED CHANGES IN 2025 BONUSES
Business Area Percent Change
from 2024
Equity Sales & Up 15% to 25%
Trading
Firm Management Up 10% to 15%
(Equity
Underwriting)
Advisory Up 10% to 15%
Wealth Up 8% to 10%
Management
Asset Up 7% to 12%
Management
Fixed Income Up 5% to 15%
Sales & Trading
Investment Up 5% to 15%
Banking (Debt
Underwriting)
Investment Up 5% to 8%
Banking
(Equity
Underwriting)
Private Credit Up 5% to 10%
Corporate Staff Up 5% to 8%
Hedge Funds Up 2.5% to 10%
Insurance Up 2.5% to 5%
Retail & Flat to Up 5%
Commercial
Banking
Private Equity Flat to Up 5%
Real Estate Flat
(Reporting by Tatiana Bautzer, editing by Lananh Nguyen and Rod Nickel)
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