Where 2024 bonuses should be best: business area by business area

Following yesterday's bank-by-bank bonus cheat sheet, today we have some charts suggesting which business areas overall should pay most generously this year.

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The charts below show productivity per full-time front office employee across sales and trading and investment banking divisions, measured in millions of dollars. They're derived from two different banking intelligence providers: BCG Expand and Tricumen, both of which conduct proprietary research and both of which scrutinize publicly available information. 

The two sets of data aren't entirely comparable: BCG Expand focuses on the top 10 banks; Tricumen on the top 13. But they are indicative of the relative productivity of different business areas, and of the productivity of those businesses this year compared to last. 

As the data above from BCG Expand shows, revenues per head are highest overall in banks' FICC divisions, but are barely expected to increase this year. Revenues per head in the investment banking division (M&A and equity and debt capital markets) are less than half as high as in FICC. However, IBD revenues per head are expected to increase over 40% year-on-year. IBD bonuses might therefore be expected to rise too. 

Tricumen offers more granularity. In the first nine months of this year, it says revenues per head were highest in FX and local markets ($5.6m) and lowest in M&A ($0.7m). However, year-on-year, the biggest increases occurred in equity and debt capital markets. All things being equal, this is again where bonuses might be expected to rise the most. 

As the first chart from BCG shows, the real battle over bonus allocation this year will be likely in FICC, where productivity per head is up the least. This is largely down to rates desks, where productivity has fallen. In credit, it's up. 

Looking at the ten top banks specifically, BCG Expand Partner Amrit Shahani says productivity per head in credit sales and trading is expected to rise to around $7m-$8m this year, versus $5m-$6m in down years. Macro productivity will be closer to $5m-$5.25m, says Shahani, down from $6.1m last year.

Banks' big question in the fourth quarter, is therefore whether they have the right headcount and bonus mix between credit and macro products in their fixed income trading businesses. In equities trading the questions are less pressing, and Shahani says headcount is likely to be maintained: "After two years of productivity drop and headcount cuts, we are now at levels where banks are comfortable with equities productivity, and we see them maintaining headcount at current levels for the short term." 

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