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The nightmare before Christmas for Wall Street bankers began long before Halloween.

After 10 months of slower-than-anticipated deal flow, bankers -- and equity capital markets (ECM) bankers, in particular -- are expecting less-than-stellar year-end holiday bonuses, according to a Bloomberg report on Tuesday.

Bonus Points

For ECM bankers, 2023 has been a rebound from 2022 -- just not as much as anyone was hoping for. Equity capital deal flow has eclipsed $100 billion this year, a healthy step up from $92 billion last year, but still far below the $200 billion norm seen prior to the pandemic.

Why? Blame the nearly 10% skid in the S&P 500 since its late-July peak, and the inability of even successful public market debuts from the likes of Instacart and Arm to resuscitate an all-but-dead IPO space. Worse, Q4 isn't likely to bring any salvation, according to Bloomberg Intelligence senior analyst Alison Williams. All of which means lighter compensation packages:

  • Brianne Sterling, senior vice president at executive search firm Selby Jennings, told Bloomberg that junior bankers can expect bonuses of just 60%-70% of their base salaries, compared to at least 100% in normal years.
  • The top eight banks had been expecting equity underwriting fees to increase by over 50% this year; now, consensus expectations pin that number closer to just 20%.

Private Practice: Another potential thorn in banking's side: private equity. According to the Center for Research in Security Prices, there are only about 3,700 publicly traded companies in the US today, down from roughly 8,000 in 1996. Meanwhile, between 2000 and 2021, US private equity firms have seen their management of total US corporate equities rise to nearly 20% from 4%.

Pound for Pound: While US bankers are moaning over bonuses, their UK counterparts are preparing for a banner year. A cap on banker bonuses expired in October, meaning British bakers can now score more than twice their yearly salaries in bonus pay. We'll call it The Great British Bank Off.