Bankers in New York and London are bracing for end-of-year bonuses that recruiters estimate will be 30 per cent to 50 per cent lower, while some may receive nothing as dealmaking falters and economic gloom sets takes hold.
Financiers face disappointment when their compensation awards land in the first quarter, and thousands more of their colleagues could be laid off after hundreds were let go this year, according to recruiters and compensation experts.
Last year, the industry handed out the biggest awards since 2006 as the economy roared back from the pandemic.
But this year, the pace of mergers and acquisitions and stock offerings dramatically slowed as debt financing markets collapsed and stock market volatility hurt valuations. The outlook for a recession also increased as the year progressed with the Federal Reserve aggressively raising interest rates to tackle inflation, cooling economic activity.
For US managing directors at Goldman Sachs Group, leaner times will probably translate to a 40 per cent to 45 per cent decline in average compensation for 2022, according to data provided to Reuters by Sheffield Haworth, a recruitment firm for top executives.
At rival Morgan Stanley, average pay for senior bankers is forecast to slide 35 per cent to 40 per cent according to the report authored by Julian Bell, Sheffield Haworth's head of the Americas and Natalie Machicao, a vice president.
It's a major reversal for dealmakers who made record profits for their firms last year and secured eye-watering payouts for themselves.
“'Flat' is once again the new 'up' this year, with most people just hoping not to see a significant cut in their compensation given how revenues for the industry as a whole have fallen,” said Stephane Rambosson, London-based cofounder of Vici Advisory, which specialises in hiring senior investment bankers.
At JP Morgan Chase, average total compensation for US managing directors is forecast to drop by between 35 per cent and 40 per cent, and pay for senior bankers at Citigroup and Bank of America will probably shrink by about 35 per cent and 30 per cent, respectively, according to Sheffield Haworth.
While the estimates reflect averages, payouts can vary widely depending on individual and group performance.
The banks declined to comment.
Managing directors at Wall Street banks typically earn salaries of $350,000 to $600,000 a year, with bonuses of one or two times their base pay, according to Wall Street Prep, a company that helps aspiring bankers train for the industry. For top performers, incentive compensation can soar to millions of dollars.
The pay slump coincides with a decline in global equity underwriting of 66 per cent, or $517 billion in deal value, value of mergers and acquisitions sank 37 per cent to $3.66 trillion by December 20, after hitting an all-time high of $5.9 trillion last year, the data showed.
The KBW Bank Index, which tracks major US bank stocks, has slumped about 26 per cent this year.
The slowdown comes as the US Federal Reserve and other central banks raise interest rates aggressively to tame inflation, moves that have curtailed economic activity.
Other risks including economic uncertainty spurred by the war in Ukraine, tense US-China relations and supply chain problems fuelled volatility in certain markets.
Traders in fixed income, currencies and commodities performed better than their investment banking colleagues. Compensation for FICC traders will probably rise slightly or stay flat, said Mr Bell at Sheffield Haworth, while stock traders could see a small drop.
Barclays' FICC traders doubled their revenues for the third quarter compared to last year, a bright spot that helped the bank beat expectations despite rising costs elsewhere, according its results in October.
Worsening economic conditions have already prompted firms including Morgan Stanley and Citigroup, to trim their workforces. After an initial round of layoffs this year, Goldman Sachs is planning to cut thousands of employees in the new year to navigate a difficult environment, a source familiar with the matter said.
In the UK, most big firms are discussing and allocating bonuses now, with decisions not usually announced until early next year. Barclays and HSBC have already started to trim staff in underperforming areas of investment banking.
British banks are also under immense pressure to lift wages for their lower-earning staff in Britain as soaring inflation erodes household incomes. NatWest offered the bulk of its 41,500 staff in Britain a pay rise and one-off cash sum after a backlash from lower-paid employees who missed out earlier this year.
“We expect bonus pools to reduce compared to last year, and there will be no bonuses at some institutions,” said Sophie Scholes, a partner at leadership advisory firm Heidrick & Struggles in London.
A situation that rewards star performers over their colleagues “will leave some disappointed”, she said.
UAE currency: the story behind the money in your pockets
Why are asylum seekers being housed in hotels?
The number of asylum applications in the UK has reached a new record high, driven by those illegally entering the country in small boats crossing the English Channel.
A total of 111,084 people applied for asylum in the UK in the year to June 2025, the highest number for any 12-month period since current records began in 2001.
Asylum seekers and their families can be housed in temporary accommodation while their claim is assessed.
The Home Office provides the accommodation, meaning asylum seekers cannot choose where they live.
When there is not enough housing, the Home Office can move people to hotels or large sites like former military bases.
THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Ways to control drones
Countries have been coming up with ways to restrict and monitor the use of non-commercial drones to keep them from trespassing on controlled areas such as airports.
"Drones vary in size and some can be as big as a small city car - so imagine the impact of one hitting an airplane. It's a huge risk, especially when commercial airliners are not designed to make or take sudden evasive manoeuvres like drones can" says Saj Ahmed, chief analyst at London-based StrategicAero Research.
New measures have now been taken to monitor drone activity, Geo-fencing technology is one.
It's a method designed to prevent drones from drifting into banned areas. The technology uses GPS location signals to stop its machines flying close to airports and other restricted zones.
The European commission has recently announced a blueprint to make drone use in low-level airspace safe, secure and environmentally friendly. This process is called “U-Space” – it covers altitudes of up to 150 metres. It is also noteworthy that that UK Civil Aviation Authority recommends drones to be flown at no higher than 400ft. “U-Space” technology will be governed by a system similar to air traffic control management, which will be automated using tools like geo-fencing.
The UAE has drawn serious measures to ensure users register their devices under strict new laws. Authorities have urged that users must obtain approval in advance before flying the drones, non registered drone use in Dubai will result in a fine of up to twenty thousand dirhams under a new resolution approved by Sheikh Hamdan bin Mohammed, Crown Prince of Dubai.
Mr Ahmad suggest that "Hefty fines running into hundreds of thousands of dollars need to compensate for the cost of airport disruption and flight diversions to lengthy jail spells, confiscation of travel rights and use of drones for a lengthy period" must be enforced in order to reduce airport intrusion.
The Cockroach
(Vintage)
Ian McEwan
