The next bonus season continues to look better quarter by quarter, with current expectations seeing banker bonuses increase in trading, underwriting and management, led by a potential 25%–35% bump for debt capital market bankers, according to pay analysis firm Johnson Associates.

Across the five biggest US banks, including JP Morgan, Bank of America and Citigroup, revenue from debt underwriting rose 59% in the July–September quarter from a year earlier, leaving DCM revenues up about 53% in the first nine months of the year across the group.

Initial public offerings and secondary offerings are also continuing to rebound this year, putting equity capital markets bankers in line for the second best bonus boost this year, with pay expected to rise 15%–25%, according to Johnson.

That tracks with the performance of top banks. The top five banks reported a 27% increase in ECM revenue in the third quarter and a nearly 46% increase in the nine-month period from January to September.

“Banks will continue to focus on aligning incentive pools with business results, which have been strong,” said Johnson Associates principal Chris Connors.

While the rebound in M&A is still sluggish, Johnson boosted expectations for advisory bankers. Those bankers can now see bonus pay rise 5% to 10% in 2025 compared to payouts earlier this year, when bonuses fell as M&A activity slumped.

Advisory revenue across the top five US banks was up 8% in the first nine months of the year, including a 9% increase in the third quarter. Transaction volume typically accelerates in the fourth quarter, and bankers are expecting energy around former US President Donald Trump's reelection to turbocharge dealmaking.

Independent banks, including Evercore, Lazard, PJT Partners, Moelis and Perella Weinberg Partners, had an even better quarter and nine-month period, with advisory revenue rising 30% and 26%, respectively.

Competition for M&A bankers between independents and bulge-bracket firms could also boost pay this year. Banks in both groups have made a point of talking up hiring as a priority as they face historic deal backlogs.

Trading boom

The boom in equities trading has continued to chug along, defying expectations. And despite the intense battle for market share, most banks have reason to be generous this year

Johnson has boosted its bonus estimates for traders in equities to 15%–20%, up from 10%–15% at the end of the second quarter. Trading surged on investors “rerisking” in a rising market in the second quarter and accelerated again in the third quarter on market volatility and continued client engagement, Johnson said in its report.

Equity trading revenue rose 22% on average across the top five US banks in the third quarter and increased 15% to a whopping US$37bn in the first nine months of the year.

Johnson expects traders in fixed-income sales and trading could see bonuses rise 5%–10%.

While revenue from fixed-income, currency and commodities trading was essentially flat across the top five US banks in the first nine months of the year, the level is near historical peaks. FICC revenue was down more than 2% on average across the top banks.

Bankers in global retail and commercial banking could see pay fall as much as 5%, according to Johnson, citing concerns over lending and credit losses.
For general corporate banking employees, bonus pay is likely to rise 5%–10%, while bonuses for management could rise 10%–15%, according to the report.

Away from traditional banking, Johnson is expecting big bonuses for bankers in hedge funds, up 5% to 15% and in private credit up more than 10%. Hedge funds are benefiting from positive flows in general, with equity and event-driven funds outperforming. Private credit, which Johnson called the “hottest sector”, has been expanding rapidly. As such, the talent market is currently highly competitive.

Source: IFR