Around a month ago when bonus discussions were heating up, I took a different approach from most others and looked at each bank’s…. investment banking revenue.
Based on this analysis, I concluded that bonuses would be down 20-30% overall:
“…But if I had to guess, I’d say that bonuses will be down 20-30% overall. Something in the range of $60-75K for 1st Year Analysts’ top bonus seems reasonable.”
So I don’t see why anyone (at least anyone who read the post) was particularly surprised at the outcome: top bonuses for 1st Year Analysts were indeed in that range.
The Numbers (In Case You’ve Been Hiding Under A Rock)
For those not in banking / those who did not already hear, top 1st Year bonus this year was $65K and top 2nd Year bonus was $85K. Those are down from $90K and $115K last year, respectively.
Below that, “2nd tier” bonuses for 1st years were in the $50-55K range and 3rd tier bonuses fell by another $10-15K.
Beyond that, 4th tier bonuses consisted of being shown the door (or The Conference Room).
I don’t know what specifically each bank paid everyone, and I’m sure there were slight differences in the tiers at different places as well.
But the main point is that bonuses were down 20-30% overall, just as I predicted based on banking revenue.
Why You Shouldn’t Be Disappointed
Over the past week many of the Analysts in my office had been complaining that bonuses were “so low” this year and that they fell off a cliff compared to last year.
Those points may be true, but “only” making $125K (or anything in the six-figure range) is still an absurd amount for a 23 or 24-year old who is just out of college.
I would also point out that back in 2005, top 1st Year bonus was $60K. Even with all the economic problems this year, bonuses were still higher than they were in 2005!
I actually thought bonuses would drop even lower, given how slow dealflow had been over the past year and how little “real work” I had done (one of the reasons I had the time to create this site…).
Why Now Is Actually A Good Time To Enter Banking
I’ve seen some comments that right now is a “bad time” to enter investment banking (or anything in finance) because the market is terrible, bonuses are down 30%+, and people are getting laid off or transferred.
I actually disagree with this and think it’s a good time to enter the field – assuming you can get in.
Markets – whether real estate, the stock market, or the job market – are always best to “buy” into when they’re at their bottom… and that is where we’re at right now (though some argue it could fall even further).
The advantage of getting in now is that a few years from now you can ride the wave at a much higher-level position and take advantage of significantly higher bonuses when the markets recover.
Sure, an Analyst might earn a $90K bonus when times are great (last year) and $65K when things go downhill (this year), but what about VPs and up? The difference there might be in the hundreds of thousands per year.
If you’re just testing the waters and are planning to move onto something else after a few years of banking, then now may not be the best time to enter the field (wait for the boom…).
Whenever bonus numbers for a given year are released, the next question on everyone’s minds (aside from how they will spend their new-found cash) is what next year’s bonuses will be.
I certainly don’t think they will be up much, if at all. The most likely scenario is flat to down slightly, though if the bottom really drops out of the economy, bonuses could fall more than “slightly.”
Historical Bonus Predictions & Actual Numbers
- 2008 Investment Banking Bonus Predictions | Actual Numbers
- 2009 Investment Banking Bonus Predictions | Actual Numbers
- 2010 Investment Banking Bonus Predictions | Actual Numbers
- 2011 Investment Banking Bonus Predictions | Actual Numbers
- 2012 Investment Banking Bonus Predictions | Actual Numbers
- 2013 Investment Banking Bonus Predictions | Actual Numbers
- 2014 Investment Banking Bonus Predictions | Actual Numbers