‘For the master of the universe … it’s going to be a difficult year:’ Wall Street bonuses expected to plunge 45%

The days of eye-popping bonuses for bankers are coming to a screeching halt.

Wall Street payouts are expected to plummet by as much as 45% as financiers face economic headwinds and a looming recession, according to new data from compensation consulting firm Johnson Associates.

“Most Wall Street professionals will be quite disappointed and surprised when they receive their year-end bonuses,” said Alan Johnson, managing director of Johnson Associates. “For the traditional master of the universe … it’s going to be a difficult year.”

Investment banking underwriters — who got the biggest bump in 2021 with bonuses surging 35% amid a jump in mergers and acquisitions — are going to see the biggest drop this year after deal-making fell off a cliff.

Johnson Associates projects bank underwriters will see bonuses nosedive 40% to 45% — taking bonuses back to pre-pandemic levels.

Johnson said bonuses at large private equity firms are expected to drop 5% to 10%, while mid-to-large private equity firms will drop 10% to 15%. Asset management professionals, and those working with ultra higher net worth individuals, will see a decline of around 20% to 25%, according to the consulting firm.

Wall Street workers shouldn’t bank on a windfall next year, either, added Johnson.

“[This year] has been a real downer and next year is looking so-so,” Johnson said. “We all knew it was a bubble but it’s never fun piercing the bubble.”

The reduced payouts are a dramatic change from last year, when the war for talent was raging and junior employees seemingly had endless opportunities. Now, Johnson said, most people in finance are just trying to hold on to their jobs.

On the positive side, sales and trading divisions, which saw profits decline as pandemic volatility slowed in 2021, are expected to capitalize on market uncertainty yet again — with some fixed-income traders nabbing bonuses that are 20% higher than the previous year.

Likewise, some hedge funds are having a bumper year. Macro hedge funds are expected to rake 10% to 20% more this year than last.