NEW YORK (Reuters) – Wall Street bonuses will fall roughly 30% this year, and firms are considering layoffs to preserve profits during the coronavirus recession, according to industry insiders and bank executives.
Alan Johnson, a compensation consultant whose predictions are closely watched by financial professionals, said on Wednesday that bonuses for 2020 could decline by as much as 40%, as the coronavirus outbreak hit markets hard and put millions of people out of work as non-essential businesses are forced to close.
With stocks gyrating, bond investors facing liquidity strains and underwriting and merger activity all but dead, Wall Street firms are likely to cut pay for almost everyone and defer more of it to save cash, Johnson said in a report issued by his compensation-consulting firm, Johnson Associates Inc.
People defined as “great” will likely see a 15% decline in bonuses with “meaningful” deferrals, while those considered “sub-par” will see bonuses drop 50% or more, with no deferrals and could even be terminated, the report said.
“Now is the time to get rid of the people you probably should have gotten rid of before,” Johnson said in an interview. “The industry has been carrying some extra weight for a while.”
Some firms are starting to discuss layoffs, executives told Reuters.
An executive at one Wall Street bank said his division is still deciding whether to cut some staff to lessen inevitable declines in bonuses or to keep headcount steady and offer $0 bonuses to weak performers.
Another executive from a rival firm said he expected layoffs across Wall Street in the coming months as banks contended with stalled M&A and IPO markets. “It’s really hard to support the expense base,” he said.