Junior bankers who earned $150k last year are not hopeful about analyst bonuses
It's bonus season for analysts working in the investment banking division of various leading banks. Despite the prodigious increase in investment banking revenues at various top firms, junior bankers don't seem optimistic. Instead, on forum website Wall Street Oasis, there are suggestions that this year's packages are "scarily" low.
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How low could they go? The tables below show figures for 2023 first year analyst compensation in London and the US, provided by recruitment firms Dartmouth Partners and Prospect Rock Partners. They suggest that the average bonus for a first year analyst in the US last year was $45k. In the UK, it was £29k ($38k). In London, average bonuses across the analyst ranks were down by around 13% on 2022. In the US, Prospect Rock says they were down 5% for first years and 23% for analyst twos.
The fear is that in 2024 analyst bonuses could again decline or be flat at best. Even though fees earned by M&A and equity and debt capital markets businesses in the second quarter were up by double-digit percentages year-on-year at some banks and even though banks like Morgan Stanley are enthusiastically calling the start of a new multi-year investment banking cycle, the real upswing isn't quite upon us and may still be delayed by the US election. In debt capital markets in particular, the expectation is that things will quieten in the second half after refinancing deals were bought forward. And even though, fees are up, they're up from a very low base.
Meridith Fiedler Dennes, managing partner at Prospect Rock Partners, tells us that her expectation is that analyst bonuses will in fact be flat to down 10% this summer. At worse, she says there could even be another round of analyst job cuts in October. The market is "bananas" and there's still uncertainty over rate cuts, she explains.
Some banks will be under more pressure to massage pay lower than others, and some will be under more pressure to be generous. Dartmouth Partners says Deutsche Bank cut first year analyst compensation by 9% last year, making it one of the worst payers in 2023 along with Barclays and UBS. By comparison, Dartmouth says Citi and JPMorgan increased first year compensation by 8% and 12% respectively in London in 2023; both may have bought sufficient goodwill to reduce their generosity in 2024.
Not every bank awards analyst bonuses in the summer, but many do. London recruitment firm Pearse Partners says the practice applies to: Barclays, Bank of America, Citi, Deutsche Bank, Goldman Sachs, Jefferies JPMorgan, Morgan Stanley, UBS and most of the elite boutiques.
An analyst at one of these banks tells that "of course" bonuses will be poor again this year. "The bank is cheap," he explains. "The era of massive payouts may have ended. Long hours, low bonuses. There's better pay in tech or being a freelancer."
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