COVID-driven divide emerges on Wall Street as bonus season looms

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The US banking industry has weathered eight months of COVID-19, and bonus season is shaping up to be “A Tale of Two Wall Streets.”

Banker bonuses overall are on track to drop by as much as 30 percent from a year ago as the pandemic has spurred a wave of business loan defaults nationwide, according to a Thursday report by Johnson Associates, a New York compensation consultant.

The bankers who trade stocks and bonds, however, could see their extra checks balloon by as much as 45 percent as markets surged to a record recovery in the second half of 2020, the quarterly survey found. Traders at larger institutions will be some of the biggest winners, seeing their bonuses increase by as much as 45 percent as fixed-income trading keeps setting records in the last weeks of 2020.

“The majority of professionals at traditional and alternative asset firms as well as retail and commercial bankers will see smaller bonuses,” said the firm’s managing director, Alan Johnson. “Conversely, fixed income pros will be rewarded handsomely as uncertainty and high volatility contributed to record trading.”

Johnson sees commercial bankers’ bonus pools shrinking by 25 to 30 percent, while some investment bankers who lost out on months of dealmaking will fare only a little better, with their compensation dropping 15 percent to 20 percent.

Investment bankers who specialize in taking companies public will be the biggest winners, seeing their bonuses increase by as much as 40 percent thanks in part to this year’s wave of companies doing initial public offerings through so-called “blank check” companies, also known as special-purpose acquisition companies, or SPACs.

Hedge funders will have a check about 5 percent to 10 percent smaller to drop into their fleece-vest pockets, according to Johnson, as the industry has struggled to get back in the black after the shock of the spring.

“As compared to many sectors of the economy, select areas of financial services have rebounded,” Johnson said. “Unfortunately, as we look to 2021, even with an optimistic vaccine path, the pandemic will continue to negatively influence businesses, but perhaps to a lesser degree than in 2020.”

A Global Asset Management Seoul Korea Magazine

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