Junior investment bankers in London received significantly smaller bonuses in 2023 as a prolonged slump in mergers and acquisitions and economic uncertainty dulled pay rewards across the board.
(Bloomberg) — Junior investment bankers in London received significantly smaller bonuses in 2023 as a prolonged slump in mergers and acquisitions and economic uncertainty dulled pay rewards across the board.
Bonuses for first-year analysts fell to an average of 43.2% of base salary in summer 2023, down from 55.3% last year, according to a report by financial services recruitment firm Dartmouth Partners. The numbers also shrank for more experienced employees, the survey showed.
Rising borrowing costs globally and risks of a recession in many parts of the world have weighed on deals, with transactions dropping more than 30% year-on-year to $2.1 trillion, data compiled by Bloomberg show. At the current rate, dealmakers could struggle to hit $3 trillion for 2023 — an annual figure that’s been a given for the last decade.
The headwinds are forcing many investment banks to look more critically at headcount, with Barclays Plc undertaking the latest round of job cuts last week. Goldman Sachs Group Inc. is also among those that have reduced their workforce.
Read more: The Great M&A Slump Is Shaking Up Giants of Investment Banking
“While the turbulence over the last 12 months may have left junior bankers relieved to have kept their jobs, there was disappointment among some professionals not to receive higher bonus figures that reflected their hard work during a difficult period,” the Dartmouth report said.
The survey of 137 junior bankers between July and August at some of the largest lenders, including JPMorgan Chase, Citigroup and Morgan Stanley, showed that though sentiment was largely negative, lower level bankers were shielded from the more intense belt-tightening endured by their seniors.
Base salaries of juniors increased, softening the blow of falling bonuses. Compensation largely stayed flat year-on-year among the least experienced employees, while analysts in their second year saw a slight increase. Most seniors in the survey reported a real-term decline of 1%. That’s considerably better than the 13% drop in total compensation seen among the highest tier of vice presidents in 2022.
With redundancy jitters gripping the sector, employee-driven job moves fell considerably from their pandemic highs, the report added. Attrition rates — largely reflective of confidence levels among workers — slowed to 5%-10% in the summer of 2023, down from 30% during the Covid-19 crisis, the report said. Barclays CEO C.S. Venkatakrishnan also recently said front-office recruitment in the sector is likely to have “plateaued.”
“Things are starting to open up, but it’s a far cry from mid-2022,” Alex Croft, a director at Dartmouth, said in a phone interview with Bloomberg News. “Recruitment has been very limited — the last comparable period to this was back in 2016, after the Brexit referendum.”
The recruiter said it expects low M&A revenues will impact compensation across the experience spectrum, meaning “the days of significant bonuses are gone for the foreseeable future.”
–With assistance from Fareed Sahloul.
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