Wall Street may feel as if it’s suffering – coming under more intense scrutiny from regulators, and anxious about the impact of the Federal Reserve’s much-anticipated “tapering” of quantitative easing. Its most recent crop of earnings reports have suggested otherwise, though. The Street is doing quite nicely – and, according to a just-released survey from compensation consulting firm Johnson Associates, so are many of its employees.
Those workers who have hung on to their jobs through the most recent round of cutbacks can look forward to significantly higher bonus payments in the new year, the Johnson Associates survey finds. On average, securities industry employees took home cash bonuses of $121,900 in 2012, up 9 percent from the prior year, according to a report released earlier this year by the New York State Comptroller.
Those with most to celebrate are the bankers who work on IPOs such as the blockbuster Noodles & Co. (NASDAQ: NDLS) deal: Their bonuses could go up as much as 25 percent from last year’s levels and will be at least 15 percent higher. Despite the more challenging market environment, fixed income traders and others could see gains of 5 percent to 15 percent, while equities traders will fare better, with bonuses rising 10 percent to 20 percent.
Those not working in a “profit center” – trading, underwriting, advising on mergers or otherwise generating fees – will have to settle for a ho-hum 5 percent increase, as the report suggests the focus on cost containment means greater conservatism when it comes to pay for support staff, lawyers, etc. Meanwhile, the likes of Lloyd Blankfein and Jamie Dimon can look for a bonus 5 percent to 15 percent higher than it was a year ago. Growing assets under management across the spectrum – from mutual funds and private banks to hedge funds and private equity – will translate into higher bonuses in these areas as well.
The more depressing areas? Well, if you’re in commercial or retail banking, brace yourself for a flat year, or one in which your bonus goes up only 5 percent. Deposit-taking and plain vanilla lending to either businesses or individuals just isn’t generating as much activity as it once did.
Remarkably, shareholders also may end up being happy with these payout levels, as they represent slightly smaller proportions of the banks’ net revenue and pre-tax net income. While Johnson Associates cautions that the data is made fuzzy by partial year compensation and results, there has been a sharp drop in the latter ratio in particular, from nearly 70 percent to just about 60 percent. If it all pans out as the compensation firm predicts, it will be a very happy new year indeed for the denizens of Wall Street.