Given the horrible year in the financial industry (mass layoffs, plunging stock prices, mediocre trading results) this news is pretty obvious: bonuses are going to be bad.
A report from Johnson Associates, via Bloomberg, estimates that bonuses will be down up to 30% in some cases.
In fact, even this number might prove optimistic given some of the other assumptions the group is using:
Wall Street firms set aside a portion of revenue to pay year-end bonuses. Goldman Sachs cut its compensation pool 9 per cent in the first half from the same period last year. JPMorgan Chase & Co. (JPM)’s investment bank kept its first-half compensation expense unchanged, while Morgan Stanley (MS) said on July 21 that it set aside 10 per cent more to pay bankers and traders.
Johnson said bonuses for equity traders will be flat to down 15 per cent, while employees in the prime brokerage divisions that service hedge funds may still get as much as 5 per cent more in bonuses.
Presumably a lot depends on what becomes of this latest market panic, and the plunge in bank stock prices that we’ve witnessed over the last couple of weeks. If they continue to get hammered, it seems safe to say that a wipeout is in the cards.