If there were any residual hope that 2022's bonuses in investment banks would be like 2021's, this week's results from U.S. investment banks are shattering illusions.
In today's first quarter results, Goldman Sachs reveals that it spent a massive 36% less on compensation in the first three months of 2022 than in the first three months of 2021. Morgan Stanley also released its Q1 results today and says compensation and benefits spending in its Institutional Securities business (investment bank) was down 16% year-on-year.
This follows yesterday's JPMorgan results, which showed compensation spending int the corporate and investment bank falling by 7.5% year-on-year.
Like JPMorgan, Goldman Sachs has been adding staff while cutting pay. When Goldman's 4,800 extra employees are factored in, average pay per head at Goldman in Q1 was $91k. This was a 40% drop on the $150k Goldman paid in the first quarter of last year.
Citi also reported its first quarter results today. Citi doesn't break out compensation spending in its corporate and investment bank, but a 51% drop in net income in its Institutional Clients Group (Citi's investment bank) thanks to increased Russia-related loan reserves, does not augur well for Citi bonuses either.
Naturally, some staff seem to be doing better at accruing bonuses than others. The chart below shows each bank's revenue performance comparative to the first quarter of 2021.
While equity underwriting (equity capital markets/ECM) bankers have had a terrible quarter everywhere, and while debt underwriting isn't looking too good either, today's results confirm that M&A bankers are still thriving. At Morgan Stanley, M&A revenues are up 97% year-on-year.
In sales and trading, the picture is more mixed. Fixed income traders haven't done badly across the board but some desks have had better quarters than others. Goldman Sachs highlighted a strong quarter in currencies and in commodities, but not in both mortgages and credit products. Cash equities revenues were down, but like JPMorgan Goldman said its prime broking balances were up.
Citi said its rates and FX traders had good quarters but its credit traders also suffered. Morgan Stanley's credit traders had a similar experience, but again its commodities and FX traders had a good quarter.
Based on Q1, therefore, it looks like M&A bankers, commodities traders, FX traders and prime broking professionals are best placed this year. ECM bankers everywhere will be lucky to keep their jobs.
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