Wall Street bonuses likely to plunge as trading revenue drops

Thu Oct 15, 2015 6:06pm EDT
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By Olivia Oran

NEW YORK (Reuters) - Wall Street bankers and traders are likely to get smaller bonuses for 2015 as trading revenue plunges.

Goldman Sachs said on Thursday that it set aside 16 percent less money for compensation in the third quarter compared with the same period in 2014. The fourth quarter, when banks determine how much they will pay for bonuses, may bring little relief for employees.

Goldman's total trading revenue dropped 15 percent in the third quarter after volume fell in fixed income, currencies, and commodities. Many investors are reluctant to take on too much risk in bonds and related derivatives until they have a better sense of when the U.S. central bank will start raising benchmark interest rates.

Other banks set aside less money for pay in the third quarter as well. JPMorgan Chase & Co said on Tuesday that it had set aside 13 percent less money for compensation in the third quarter compared with the same period last year.

When Morgan Stanley posts third quarter earnings on Monday, Citigroup analyst Keith Horowitz estimates that it will have cut its spending on compensation by 7 percent for the quarter.

Regarding the fourth quarter, JPMorgan CFO Marianne Lake said on Tuesday that "markets are pretty quiet" so far this month. Any declines in revenue may affect what the bank will spend on compensation.

Bonuses across Wall Street could fall about 10 percent this year, with traders taking the biggest hit, said Alan Johnson, managing director of pay consulting firm Johnson Associates.

Investment bankers, meanwhile, will likely see higher pay, as the environment for mergers and acquisitions remains strong. Deal volume in the first three quarters totaled $1.02 trillion, up 11 percent from the same period last year, Thomson Reuters data show. Goldman tops the league tables with 299 deals as of the end of September, generating $2.6 billion in M&A advisory fees so far this year.   Continued...

A sign hangs in front of U.S. flags outside of the New York Stock Exchange in New York September 1, 2015.  REUTERS/Lucas Jackson