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Wall Street bonuses hit bottom and are poised to rebound about 20 percent this year as markets improve, according to Alan Johnson, president and founder of compensation consulting company Johnson Associates Inc.
“The major Wall Street firms have cut enough of their costs that it doesn’t take much in the way of increased revenue to generate significant profits or pay,” Johnson said in a telephone interview today. “A percentage increase off a smaller number still isn’t a huge number.”
JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) were among New York-based banks that reduced bonuses last year to help keep costs in line with falling revenue from sales and trading. Incentive pay at the major investment and commercial banks fell 20 percent to more than 40 percent in 2011, Johnson estimated in a presentation to the Wall Street Compensation and Benefits Association this month.
The industry is at a “positive inflection point,” Johnson said in the slide presentation. “Compensation will increase significantly” as firms achieve a return on equity of around 15 percent in the next three years, he said.
Fixed-income traders, whose bonuses were cut last year by an average of 35 percent to 45 percent according to Johnson, are likely to see the biggest percentage gains this year, he said.
Fixed-income “is doing better but it’s gone from very poor to poor,” Johnson said. “But that’s a pretty big change.”
For chief executive officers at large banks, “normal” annual pay is in the range of $13 million to $23 million, Johnson estimated, based on historical data. That should be what they get in 2012, he said, “assuming that performance continues to improve.”
“The major Wall Street firms have cut enough of their costs that it doesn’t take much in the way of increased revenue to generate significant profits or pay,” Johnson said in a telephone interview today. “A percentage increase off a smaller number still isn’t a huge number.”
JPMorgan Chase & Co. (JPM) and Goldman Sachs Group Inc. (GS) were among New York-based banks that reduced bonuses last year to help keep costs in line with falling revenue from sales and trading. Incentive pay at the major investment and commercial banks fell 20 percent to more than 40 percent in 2011, Johnson estimated in a presentation to the Wall Street Compensation and Benefits Association this month.
The industry is at a “positive inflection point,” Johnson said in the slide presentation. “Compensation will increase significantly” as firms achieve a return on equity of around 15 percent in the next three years, he said.
Fixed-income traders, whose bonuses were cut last year by an average of 35 percent to 45 percent according to Johnson, are likely to see the biggest percentage gains this year, he said.
Fixed-income “is doing better but it’s gone from very poor to poor,” Johnson said. “But that’s a pretty big change.”
For chief executive officers at large banks, “normal” annual pay is in the range of $13 million to $23 million, Johnson estimated, based on historical data. That should be what they get in 2012, he said, “assuming that performance continues to improve.”
