Bonus pools are shrinking at some of the biggest banks this year, including Goldman Sachs, JP Morgan, Citi, and Bank of America.
DAVE BRIGGS: Following years of big bank bonuses, a lump of coal might be coming their way this Christmas. JPMorgan Chase, Bank of America, and Citigroup planning to cut investment banker bonuses by as much as 30%, according to Bloomberg. Some plan to forgo bonuses entirely for low performers. The reason, of course, investment banking revenue, decimated, nearly cut in half at the five biggest US banks, a decline of $18.8 billion in the first nine months of the year.
The report suggests more than 100 Goldman investment bankers could be, as they say, zeroed out, get a goose egg, donut, or even a bagel. Yeah, Seana, of course, their slang for getting zero bonuses, a thing journalists have been accustomed to for our entire careers.
SEANA SMITH: Yeah, I know. That must be nice. But I do think, though, this is part of a larger trend, just in terms of, I don't think it's a big surprise that bonuses are falling. If they weren't falling, I think that would be a huge story, given the fact that we've seen such a decline in their business over the last 12 months. What will be interesting going forward, bringing it back to jobs, is the potential layoffs that we could see within the sector.
We know many of these banks typically have annual layoffs at the end of the year, where they cut X amount of their lowest performers, their underperformers. That has largely been suspended over the last two years. A couple of banks have said that they will be reinstating that this year. A couple have said, or there are reports, like Bank of America could be reinstating that next year.
But in terms of the layoffs, haven't really hit this sector hard in terms of comparing it to how we've seen in prior slowdowns and in recession. So I think that's the next shoe to drop in this sector, is whether or not we will see more layoffs in 2023.
DAVE BRIGGS: And if I could spin that forward as well, curious if the economic impact of those not lesser bonuses-- that's certainly money that gets put out there in the economy around the holiday season-- and beyond that, the IPO market. The IPO market has been devastated. It has been ghost town. Think how much press was dedicated to the Porsche IPO, down 93% IPO activity from 2021. Will that rebound next year? And if so, banker bonuses certainly will.