Bond Traders' Bonuses Set to Rise 15% as Banks Resume Big RaisesBy
Pay consultant Johnson Associates issues projections for 2017
Takeover advisers and equity traders may see rewards decline
Wall Street bond traders who survived years of slumping revenue are on track to receive some of the financial industry’s biggest bonus hikes for 2017 as banks increase total incentive payouts the most this decade.
That’s the initial projection from compensation consultant Johnson Associates Inc. after revenue from fixed-income trading climbed at several big U.S. banks in the first quarter. People in those operations will probably see annual bonuses jump 10 percent to 15 percent. Their colleagues who underwrite securities offerings are set for raises of 10 percent to 20 percent.
The reversal for bond traders in recent months contrasts with the situation facing some of their biggest clients. Hedge funds and asset managers will generally hold pay flat this year, according to estimates Johnson released on Wednesday. Both of those groups have cut incentive pay the past few years, the firm’s data show.
Fixed-income operations that struggled for years sprang back to life in the second half of 2016, spurred by geopolitical shocks such as the U.K.’s vote to leave the European Union and Donald Trump’s victory in the U.S. presidential election. The momentum carried into this year, with JPMorgan Chase & Co., Citigroup Inc., Bank of America Corp. and Morgan Stanley all reporting higher revenue from that business in the first three months.
“Political uncertainty, market activity, interest rates, and ongoing challenges in world markets are key 2017 incentive drivers,” Johnson said in the report. “Political uncertainty remains at forefront.”
Yet, not all bank employees are due to reap the benefits. Rewards for bankers advising on mergers and acquisitions may be cut by 5 percent to 10 percent, according to the estimates. Payouts to employees in equities sales and trading will probably be the same as the prior year, or down as much as 5 percent. And staff in retail and commercial banking may also get the same, or modest increases of as much as 5 percent.
Employees at private equity firms could see 5 percent to 15 percent gains in incentive and equity awards this year, excluding carried interest. Buyout firms including Carlyle Group LP and Blackstone Group LP reported quarterly profits that beat expectations.