The latest quarterly missive from Wall Street’s omniscient compensation paylord-bonus guru, Alan Johnson, doesn’t make for very cheering reading. According to Johnson and his analysts, any more unforeseen writedowns could lead to a ‘compensation meltdown’. Given most writedowns have been unforeseen so far, the prognosis isn’t particularly great.
Other cheering trends identified by Johnson are as follows:
• A crescendo of layoffs is coming as banks realise that some businesses are not coming back (ever).
• Smaller severance packages are coming as cost cutting continues.
• More deferred stock than ever is coming because banks don’t care about retention any more.
Johnson also has some predictions for how much bonuses will fall by. Fundamentally, he thinks bonuses will be down for everyone, but the following contingents will feel particularly severe pain:
• Investment bankers (underwriting and advisory): down 25-30%
• Vanilla fixed income professionals: down more than 25%
• Senior management at investment banks: down 35-45%
He says the least pay-afflicted staff will be in prime brokerage and private banking: they’ll be paid down only 10%. Everyone else should be prepared for 15-20% cuts.
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