Reuters / John Gress
- Bonus compensation is expected to rise across nearly every Wall Street business in 2018, according to a report by consulting firm Johnson Associates.
- After a rough performance in recent years, stock trading has bounced back and is expected to see the biggest gains, with bonuses climbing as much as 15%.
Bonuses are expected to soar across Wall Street, and stock traders, after several rough years, are on track to see the biggest gains as the return of market volatility has helped revive their prospects.
Nearly every Wall Street line of business is looking at an increase in 2018 bonus compensation, from retail and commercial banking, to private equity, to sales and trading, according to a new report from compensation consulting firm Johnson Associates. These bonuses are likely to be paid in 2019 for work done in 2018.
"The headline is everybody seems to be better," Alan Johnson, founder and managing director of Johnson Associates, told Business Insider. "It's the first time since the crisis people have been this optimistic."
Stock traders are primed to see bonus pay increase by as much as 15%, more than any other group, according to the report.
Banks' stock trading businesses have suffered in recent years as markets calmly chugged upward and client activity sagged. But volatility surged back to life in 2018 and client demand for trading services sharply increased, carrying banks to record equities revenue in the first quarter.
Johnson said he expected equities "to be up for the rest of the year," but not on par with the "euphoric trading" of 2007 and 2008.
"This is not your grandma's trading. This is a more constrained, client-driven trading," Johnson said. "We won't see perhaps the profits we saw before the crisis."
The lone business expected to see a decline in bonus pay is the investment banking advisory business.
Despite a record year thus far in mergers-and-acquisitions activity, Johnson doesn't expect the pace to continue and projects bonuses to fall by 5% to 10% compared with the strong performance the industry had in 2017.
"I think the view is the first four or five months isn't sustainable for the year," he said.
Here's how the bonus pool for every other business is expected to fair in 2018, according to the Johnson Associates report:
Johnson Associates
And here's how bonus compensation has changed across the major Wall Street industries since the financial crisis, a period in which private equity and traditional asset management have far outpaced banks and hedge funds:
Johnson Associates