Bonus Expectations Erode, But Remain Mostly Above 2009 Pace

Despite widespread hand-wringing over banks' generally poor second-quarter earnings, a prominent pay consultant says bonus levels for this year are on track to match or modestly exceed last year's payouts. Even investment bankers may earn about the same as in 2009, despite weak deal volume. But trading desks - both equity and fixed-income - face declines compared with the bumper bonuses they hauled in for 2009.

The quarterly update on financial services compensation issued this week by Johnson Associates paints a less positive picture than the firm had projected three months ago. Still, Johnson now anticipates a "small increase" in year-end payouts across the industry. At investment and commercial banking firms, bonuses are seen as "generally stable, with small increases year-over-year." Asset management firms' payouts are projected to rise by double-digit percentages, but not enough to fully offset last year's decline for that industry segment.

To put the overall numbers in perspective, Johnson projects average bonus per employee will still be about 20 percent less than the 2007 peak for sell-side firms, and more than 25 percent below 2007's level for buy-side firms.

Bonus Numbers For Each Sector

Here's a rundown of how Johnson sees various sectors faring come bonus time. The numbers represent projected percent changes compared with 2009 for the average payout per employee in each department:

- Senior firm management (excluding the very top rung comprising "proxy executives") and staff positions, up 5 - 10 percent.

- Within investment banking, flat to up 5 percent for advisory (M&A) and down 5 percent to up 5 percent for underwriting.

- Equities sales and trading, flat to down 10 percent.

- Fixed-income sales and trading, down 5 - 15 percent.

- Asset management, up 10 percent for fixed income and up 15 percent for equities.

- Prime brokerage, up 10 - 15 percent.

- Hedge funds, flat to up 10 percent.

- Private equity, up 5 - 10 percent.

Compared with Johnson's May 2010 update, sectors where the new projections show the most deterioration are equity sales and trading, underwriting and hedge funds.