For Many Wall Street Bankers, This Year’s Bonus Season Is a Bust

Investment banking revenue in the United States is expected to have dropped more than 50 percent from last year, to nearly $35 billion through mid-December, according to the data provider Dealogic. It’s a sharp contrast to 2021, one of the busiest years for deals and the most lucrative for investment banking revenue in more than a decade. Last year, banks generated nearly $71 billion in U.S. investment banking revenue, according to Dealogic.

In October, the food delivery company Instacart pulled plans for an initial public offering amid market turmoil, and cut its valuation from $40 billion to $24 billion. The business of taking special purpose acquisition companies public, which had brought banks billions of dollars in fees in recent years, also petered out.

Over the summer, efforts by JPMorgan Chase to sell Worldpay, a payments processing unit of Fidelity National Information Services, to private equity firms fell through, according to two people with knowledge of the matter. The potential buyers, which would have had to borrow billions of dollars from banks to fund their purchase, balked at the asking price of at least $30 billion, the people said.

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Many of the big investment banks, including Morgan Stanley, Bank of America and Barclays, are also holding roughly $13 billion of debt on their balance sheets — money they lent to Elon Musk to fund his $44 billion acquisition of Twitter, one of the technology industry’s most high-profile deals of 2022.

Normally, banks would turn around and sell that debt to investors. But the market for the kind of loans used to finance buyouts has all but dried up, forcing many banks to keep them on their balance sheets. That makes new lending more difficult for banks, especially because they might have to write down the value of that debt as Twitter sheds advertisers and Mr. Musk warns that the company has been on a “fast lane” to bankruptcy. And that means a smaller bonus pool at many banks.

Few analysts or bankers expect a sharp rebound in investment banking revenue in 2023, so cutting bonuses is a key way for banks to rein in costs, especially because compensation is one of Wall Street’s biggest expenses — and bonuses account for a large portion of it.


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