NEW YORK Aug 11 Bonuses for Wall Street's traders and underwriters will surge from 2008 levels, although they will still be below the windfalls of 2007, compensation consultant Alan Johnson forecast in a mid-year report.
Johnson forecast a wide range of pay packages across different financial services firms and among different businesses. Companies that repaid U.S. Treasury funds from last fall will have greater flexibility, yet public resentment towards lavish Wall Street pay may force even the top performing banks to strike a balance.
"It's going to be a tough year-end. People's expectations may be ahead of the financial (results)," Johnson told Reuters. "It's a tough year and you have a difficult political environment. On the other hand, that beats heading into the abyss like we were last year."
The average Wall Street bonus will rise roughly 30 percent from last year, although that is down about a third from the blowout pay of 2006 and 2007, Johnson said.
The big winners this year will be those in the hottest parts of the market: fixed income traders, up 40 percent to 50 percent from 2008, and traders of equities and equity- derivatives, up 20 percent to 30 percent.
Johnson notes that year-to-date Wall Street results are dominated by debt, currency and commodities trading, which accounted for about half of overall first half results across the leading firms. Investment banking generated just 13 percent of investment bank revenue.
Securities underwriters will see 15 percent to 20 percent increases, keeping pace with the surge in stock and debt offerings.
By contrast, merger advisers on average will see bonuses cut another 10 percent to 15 percent from 2008 lows, while prime brokerage payouts will drop by 25 percent to 30 percent.
Asset management, hedge fund and private equity executives will see bonuses slashed 20 percent to 35 percent, reflecting lower management fees and the fallen value of their portfolios.
Senior bank executives, many of which gave up 2008 bonuses amid a public backlash last year, will see "significant" increases, Johnson estimates. But officers whose pay is disclosed in regulatory filings will likely continue to see depressed bonuses.
Late last month, the New York Attorney General scolded nine banks that received $125 billion in taxpayer bailout money last year, yet paid themselves $65 billion in bonuses for 2008. Meanwhile, a bill seeking executive pay limits and a "say on pay" vote for shareholders is working its way through Congress. (Reporting by Joseph A. Giannone; editing by Andre Grenon)