Wall Street Bonuses Set to Rise as Deals Rebound

Wall Street bonuses could be set to rise this year, with debt and equity underwriters likely to see the biggest boosts as deals rebound, according to a report from compensation consulting firm Johnson Associates.

A Lackluster Two Years for Bonuses

The projected gains come after a lackluster two years for bonuses in financial services, with little to no growth for many professionals. The end-of-year incentives exploded in the low-interest-rate environment of 2021 with strong client demand and record activity in the market for initial public offerings (IPOs).

IPO Market Rebound and Greater Risk Tolerance

The projected growth follows strong performance from markets in the first half of the year, a rebound in IPO activity, and signs of investors showing greater risk tolerance, among other factors.

Compared to other professionals in financial services, debt underwriters could see the biggest bonus growth of up to 35% this year, the report said, followed by equity underwriters at 30%.

After underwriters, hedge fund, equity sales, and firm management professionals could see bonus growth of up to 15%, thanks to strong performance across business segments and investors’ willingness to take on additional risk.

Meanwhile, the retail and commercial sector could see incentives stay flat or fall amid a decline in commercial lending levels.

Overall, the positive outlook for Wall Street bonuses reflects the rebound in the IPO market and the increased risk appetite among investors. This is good news for professionals in the financial services industry who have been waiting for a boost in their compensation after two years of stagnant growth.

Implications for Debt and Equity Underwriters

The report highlights that debt and equity underwriters are expected to benefit the most from the rebound in deals. As the IPO market picks up and companies seek to raise capital, underwriters play a crucial role in facilitating these transactions.

Debt underwriters, in particular, are projected to see a significant increase in their bonuses, with growth potential of up to 35%. This is driven by the strong demand for debt issuance as companies take advantage of low interest rates to finance their operations and expansion plans.

Equity underwriters, on the other hand, are also expected to experience a substantial boost in their bonuses, with growth potential of up to 30%. The resurgence in IPO activity and investor appetite for new offerings contribute to this positive outlook.

These projections indicate that underwriters will be in high demand as companies look to raise capital and take advantage of favorable market conditions. Their expertise in structuring and pricing securities will be crucial in ensuring successful offerings and maximizing returns for issuers and investors alike.

Other Professionals in Financial Services

While debt and equity underwriters are expected to see the largest increases in their bonuses, other professionals in the financial services industry can also look forward to a boost in their compensation.

Hedge fund professionals, equity sales professionals, and firm management professionals could see bonus growth of up to 15%. This is attributed to the strong performance across various business segments and the willingness of investors to take on additional risk.

These professionals play vital roles in managing investments, providing market insights, and overseeing the operations of financial firms. Their contributions to the overall success of the industry are recognized through the increase in their bonuses.

Retail and Commercial Sector Challenges

While the outlook is positive for many professionals in the financial services industry, the retail and commercial sector may face challenges in terms of bonuses. The decline in commercial lending levels could result in flat or falling incentives for professionals in this sector.

As companies reduce their borrowing and focus on managing their existing debt, the demand for commercial lending decreases. This, in turn, affects the compensation of professionals involved in this area of finance.

However, it is important to note that the overall positive trend in Wall Street bonuses is expected to outweigh the challenges faced by the retail and commercial sector.

Conclusion

The projected rise in Wall Street bonuses this year is a welcome development for professionals in the financial services industry. The rebound in deals, particularly in the IPO market, and the increased risk tolerance among investors are driving factors behind this positive outlook.

Debt and equity underwriters are expected to see the biggest boosts in their bonuses, followed by hedge fund professionals, equity sales professionals, and firm management professionals. However, the retail and commercial sector may face challenges as commercial lending levels decline.

Overall, the projected growth in Wall Street bonuses reflects the resilience and recovery of the financial services industry. As the economy continues to rebound, professionals in this sector can look forward to a well-deserved increase in their compensation.

Read the original article on Investopedia.