Wall Street Bonus Party Off Again This Year?…Down Up to 25%

The year-end bonus parties at Wall Street financial firms in the U.S. are expected to be disappointing again this year. There are even predictions that bonuses could be cut by up to 25% due to poor performance.

On the 14th (local time), U.S. consulting firm John Su Associates released a report forecasting that bonus payments in the corporate mergers and acquisitions (M&A) sector could decrease by up to 25% by the end of this year. John Su Associates stated, "Corporate deal-making in the global M&A and initial public offering (IPO) markets has plummeted to the lowest level in a decade."

The cold wave of bonuses hitting Wall Street is caused by high interest rates. The stock and M&A markets, which enjoyed record booms during the COVID-19 pandemic, have fallen into recession due to governments' aggressive tightening policies, and as companies' capital raising fee income sharply declined, the impact has spread throughout Wall Street.

Leading Wall Street financial firms such as Goldman Sachs, JP Morgan, and Morgan Stanley have been operating under emergency management systems since last year after the high interest rates dried up cash in the market and dealt a direct blow to the investment banking (IB) sector's performance.

Due to the transaction drought caused by the direct hit from high interest rates, firms focusing on corporate finance such as Morgan Stanley and JP Morgan all reported poor results in the third quarter of this year.

Morgan Stanley's net profit for the third quarter was $2.48 billion (about 3.27 trillion KRW), down 9% from the same period last year. Revenue from its core IB division plunged 27% to $938 million from $1.277 billion in the previous year’s quarter. JP Morgan also saw its IB division revenue decrease by 3% compared to the same period last year.

James Gorman, CEO of Morgan Stanley, said, "It is unusual for IB division revenue to fall below $1 billion," adding, "The banking business is in a vulnerable situation."

The worsening performance has led to aggressive restructuring. According to U.S. economic media CNBC, the five largest U.S. banks have collectively laid off 20,000 employees this year. Among these banks, Wells Fargo, which reduced its workforce by about 5%, had the largest scale of layoffs.

Alan Johnson, CEO of John Su Associates, said, "The bonus cuts this year will feel even more dramatic due to the real income decline caused by inflation," and added, "It will be difficult for Wall Street to return to its previous growth trajectory anytime soon." Last year, the average bonus on Wall Street was $176,000 (230 million KRW), a sharp 26% drop from the previous year.

The situation is not expected to improve significantly next year. A British foreign media outlet noted, "Cost pressures, prolonged high interest rates, and the backlash from geopolitical tensions are increasing performance burdens on Wall Street," and pointed out, "Due to the prolonged high interest rate environment and geopolitical tensions, Wall Street will face another challenging year next year."

This content was produced with the assistance of AI translation services.