Wall St. Bonuses May Miss Forecasts
Wall Street’s annual bonuses will increase about 10%, half as much as bankers expected earlier this year, after major brokerages reported disappointing third-quarter revenue, compensation consultants said.
“Everyone came charging out of the gate at the beginning of the year, and the market didn’t do as well as everybody thought,” said Deborah Rivera, founder of Succession Group, an executive search firm in New York. “That’s definitely going to have an effect on people’s bonuses.”
Morgan Stanley, Goldman Sachs Group Inc., Lehman Bros. Holdings Inc. and Bear Stearns Cos. together reported a 16% decline in third-quarter revenue from the average of the first and second quarters. It’s the biggest drop since 1998 after Russia’s debt default and the near-collapse of hedge fund firm Long-Term Capital Management.
Revenue is shrinking as New York-based investment banks begin to decide on annual bonuses for bankers, traders and other employees.
“There’s clearly pressure on compensation,” David Viniar, Goldman Sachs’ chief financial officer, said when the third-largest U.S. securities firm reported earnings Sept. 21.
Almost one-third of 89 firms surveyed by the Securities Industry Assn. expect bonuses to be unchanged from a year ago and another third said they hadn’t decided. About 2% expect bonuses to be “significantly higher,” according to the association, Wall Street’s Washington-based trade group. The survey included Lehman and excluded such firms as Morgan Stanley, Goldman Sachs and Citigroup Inc.
Executive recruiters and compensation consultants, including Sibson Consulting and Compensation Resources Inc., said bankers anticipated a 25% increase in year-end bonuses as recently as May. Together, Morgan Stanley, Goldman Sachs, Lehman and Bear Stearns earned a record $3.37 billion in the quarter that ended that month.
Trading desk heads with a decade’s worth of experience will probably get an average $1.4-million bonus, down from expectations of $1.6 million in May, said Alan Johnson, who heads New York-based executive recruiter Johnson Associates. Eight years of experience and a managing director title mean $825,000, not $1 million, and third-year associates may get $300,000, not $325,000.
