Wall Street bonuses to rise 5 to 10 percent this year: consultant

Wed Nov 6, 2013 8:01pm EST
 
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By Lauren Tara LaCapra

NEW YORK (Reuters) - Wall Street's biggest risk takers - its bond traders - will probably see their bonuses drop this year, while people in safer roles, such as money managers, will likely get a boost, according to a forecast by compensation consulting firm Johnson Associates.

Overall, it said, individual Wall Street bonuses may rise 5 to 10 percent, on average, compared with last year, as the industry continues its halting recovery from the 2007-2009 financial crisis. Top executives of Wall Street firms will see bonuses rise by as much as 5 percent, Johnson Associates said.

But Alan Johnson, who heads the firm, said there is a wide disparity in payouts among business lines. The bonus spectrum reflects new priorities for Wall Street as much as market conditions, he said.

Employees in low-risk, fee-heavy businesses such as asset management and retail brokerages will probably see bonuses rise by 15 percent or more, while those in the volatile and risk-heavy business of fixed-income trading are expected to see bonuses decline by the same amount, according to the forecasts.

The declining fortunes of bond traders, once dubbed "Masters of the Universe" at investment banks, and the rising fortunes of wealth managers show how Wall Street is changing after the financial crisis, Johnson noted. Banks are also emphasizing businesses that put little money at risk and deliver steady profits, while exiting areas of trading that require a lot of capital and can lead to big swings in the firms' profits and losses, he added.

"From a regulator's perspective, that's what you want," said Johnson. "You want the banks to be in client businesses that use other people's money so that they're not too dependent on trading."

Rising stock markets and weakening fixed-income markets have also been a factor in helping retail brokers and hurting bond traders, Johnson said.

Banks including Goldman Sachs Group Inc (GS.N: Quote), Morgan Stanley (MS.N: Quote), Citigroup Inc (C.N: Quote), Bank of America Corp (BAC.N: Quote) and JPMorgan Chase & Co (JPM.N: Quote) reported weak fixed-income trading results last quarter. Some also said they set aside much less cash for compensation in their Wall Street businesses, indicating that fewer dollars of revenue will be spent on employees this year.   Continued...

 
A Wall Street sign is seen in front of the New York Stock Exchange in New York's financial district, March 4, 2013. REUTERS/Brendan McDermid