Your 2018 bonus may be big, but you'd better not spend it

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The latest Wall Street bonus projections provide both good and bad news, though it of course depends greatly on the division in which you're working. But no matter how well you do this year, know that the outlook for 2019 is rather bleak. Plan accordingly.

If the year finishes as expected, the bonus winners for 2018 will be equities traders, investment banking underwriters and private equity professionals, according to new analysis from compensation consulting firm Johnson Associates. People working in equities sales and trading can expect the biggest windfall, with up to a 20% increase over 2017 bonus totals. Traders at J.P. Morgan, Morgan Stanley and BNP Paribas should fare particularly well based on the first nine months of the year. However, don’t expect Deutsche Bank equities traders to be celebrating come year end.

In equity capital markets (ECM), underwriters can expect a 5%-10% bonus bump, according to the report. The majority of banks had a huge third quarter in ECM, led by Goldman Sachs (104% year-on-year) and Morgan Stanley (62% y/y). Those working in private equity can expect a similar 5%-10% increase in bonus from a year ago.

Some of the biggest losers in this year’s battle of the bonuses will be M&A bankers, though it should be noted the changes will be particularly firm-dependent. The industry-wide -5% anticipated dip in incentivized comp will surely be skewed by firms like Bank of America and Deutsche Bank, which saw their advisory revenue fall by 26% and 25%, respectively, in the third quarter alone. Bank of America has been a particular disappointment in M&A. Boutiques like Evercore also struggled to keep the momentum going in the third quarter.

Whether 2018 proves to be a fruitful one or not, everyone may want to tighten their belt for the coming year, which will be “less rosy” with an anticipated downward impact on compensation and headcount due to fee compressions, the fragile geopolitical climate and a greater reliance on technology, among other factors, according to Johnson Associates. “Beginning now through the first quarter of 2019, we expect to see headcount reductions through both natural attrition and selective terminations,” said Alan Johnson, managing director of Johnson Associates. “While financial sector businesses are still inherently healthy, the business challenges are expected to catch-up with them.”

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