Dive Brief:

• Bonuses for investment bankers who underwrite debt and equity could fall 40% to more than 45% in 2022, compared with last year, according to a quarterly report released Thursday by Johnson Associates. That’s down an extra 5 percentage points from a prediction the compensation consulting firm made in May.
• Bankers in fixed-income sales and trading, meanwhile, can expect their incentive pay to jump 15% to 20% over last year, while their compatriots in equities could see 5% to 10% upticks. Those estimates remain unchanged from Johnson’s May report.
• “2021 was a fabulous year and this is a real downer,” Alan Johnson, managing director of Johnson Associates, told Bloomberg on Thursday. “This year the traders will be subsidizing some of their colleagues in investment banking.”

Dive Insight:

The dour predictions on bonuses come nine months after Johnson’s consultancy predicted 30% to 35% increases in bonuses between 2020 and 2021 for investment banking underwriters. Revenue in the investment-banking silos of the five biggest Wall Street firms dropped 43% over the first half of 2022, compared with the same six months of 2021, Bloomberg reported.

“We’ve had bonus declines before, but you overlay that with inflation by the end of the year and I think it’s going to be particularly painful,” Johnson told the wire service.

Uncertainty over a potential recession, along with geopolitical events such as the Russian invasion of Ukraine, have exacerbated caution in the financial sphere. 

The war for talent that enriched bankers who tested the job market last year has abated, Johnson Associates said, and financial institutions broadly may reduce headcount through the end of the year.

The curious case of Credit Suisse

While several banks may have turned down their bonus spigots, Credit Suisse handed out roughly $302 million in July alone to retain its top bankers, according to a quarterly report. That’s nearly three-quarters of the retention payments the bank made over all of last year, and seven times greater than such payouts in 2018, 2019 or 2020, Bloomberg reported.

The second-largest Swiss lender has seen more than 60 key bankers leave for competitors over the past 18 months, the wire service reported. During that span, Credit Suisse suffered twin setbacks stemming from the collapse of Greensill Capital and Archegos Capital Management.

July’s $302 million in retention payments stand in contrast to the $1.7 billion net loss in revenue Credit Suisse reported in the second quarter of 2022 — and also to plans the bank expects to finalize over the next couple of months to reduce headcount potentially by several thousand, Bloomberg reported Thursday, citing people familiar with the matter.

“We have said we will update on progress on our comprehensive strategy review when we announce our third quarter earnings,” a spokesperson for the bank told the wire service. “Any reporting on potential outcomes before then is entirely speculative.”

The bank is examining inefficiencies in its middle and back office, alongside a retooling of its investment bank, Bloomberg’s sources said.

While Credit Suisse’s glut of retention payments goes against trend — at least, as seen by Johnson — a move toward job cuts aligns with it.

Investment banking isn’t the only space where Johnson Associates sees bonus cutbacks. The consultancy expects incentive pay for bankers in asset management to drop 15% to 20% from last year. Meanwhile, bankers in the high-net-worth silo may see incentive pay decline 10% to 15% from 2021 levels, the firm predicted Thursday.