NEW YORK — Wall Street’s sky-high annual bonuses are likely to fall a bit closer to earth this year.
Nearly everyone from the CEOs down to the entry-level analysts is preparing to see compensation cut as the end-of-year bonus season draws near.
Although final decisions are weeks away, several reports issued recently are predicting that average 2011 compensation at global investment banks will drop between 15 percent and 30 percent from last year.
Banks have already reported they reduced compensation during the first three quarters of the year. Goldman Sachs Group Inc., the most-watched name on Wall Street, set aside $10 billion from January through September — that’s down 24 percent from the same period in 2010.
“Generally speaking, everybody is cutting back big time,” said Steven Eckhaus, an executive compensation expert at the law firm Katten Muchin Rosenman. “The mood is wary.”
Banks have said this year that business has been hurt by global economic uncertainty, volatile financial markets and tough new regulations from Washington.
That led Options Group, a compensation consulting firm, to issue a report this week predicting that pay is likely to fall 27 percent from last year at investment banks in the U.S. and Europe. A similar recent report from Johnson Associates pegged the drop at between 15 percent and 30 percent.
This is a humbling turn of events for an industry that appeared to be doing much better than the rest of corporate America coming out of the financial crisis. Two years ago, Wall Street bonuses bounced back to the same levels they had reached before the crisis, and firms were hiring.
Compensation consultant James Reda said bonuses in the rest of corporate America are rising, thanks to aggressive cost cutting.
“It’s a pretty good year for corporations, as long as they aren’t in finance,” he said.
The latest quarterly reports from firms including JPMorgan Chase &Co. and Citigroup Inc. suggest profits may have rebounded somewhat in recent months. But industry analysts said most of the profits have come through accounting maneuvers and one-time items, not new business.
Investors have sent shares of investment banks and brokerages in the Standard &Poor’s 500 index down a staggering 43 percent this year, making it the worst-performing sector in an index that is essentially flat in the same period.
The falling stock prices mean that not only will bonuses be down this year, but stock options tied to compensation are now worth much less.
“I don’t think people are going to spend money on the cars and the apartments,” said Richard Lipstein, a managing director at Boyden, an executive search firm.
“People are increasingly aware of just how much uncertainty there is in the financial services industry.”
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