Wall Street’s equities traders are on course to reap the biggest year-end bonuses.
Incentive pay for equities sales and trading employees at investment and commercial banks is projected to increase 10 per cent to 15 per cent this year compared with 2017, according to a report from compensation consultant Johnson Associates Inc. The pay boost beat the 5 per cent to 10 per cent projected increase for fixed-income traders, top bank executives and private equity employees.
“With volatility, clients will trade more,” said Alan Johnson, managing director at Johnson Associates. “It’s a client-driven phenomenon.”
Banks cited volatility as a driver of earnings this year. Goldman Sachs Group Inc., Citigroup Inc. and Bank of America Corp. reported that first-quarter revenue from equities trading was up more than 35 per cent compared with the same period last year.
The biggest losers in the report are merger advisers, whose bonuses are set to fall 5 per cent to 10 per cent compared with last year. Bonuses at hedge funds are expected to be flat or grow by 5 per cent.
“The mantra is hedge funds should make more money in volatile markets, that’s always been their elixir,” Johnson said. “That’s not as automatic as it once was.”
Johnson Associates bases bonus estimates on first-quarter results and conversations with clients. The forecasts often change throughout the year.