by Brian DeChesare Comments (55)

2009 Investment Banking Analyst Bonuses: Wait, What Bonuses?

money_down_the_drainIn July each year, there’s a cry of relief heard at investment banks everywhere, as Analysts’ bank accounts instantly triple or quadruple as the long-awaited bonus finally arrives.

But this year, most offices were strangely silent.

So, what happened? There were bonuses, right? Right?

Well, sort of.

But it wasn’t pretty.

What Numbers?

When times are good, investment banking analysts circulate a spreadsheet detailing bonuses at each bank for 1st, 2nd, and 3rd year analysts, usually focusing on what the “top tier bonus” is (i.e. what Analysts who are ranked at the top of their “class” earn).

Back in 2007, the “top tier” bonus for 1st Year Analysts at most banks was $90K, 2nd Year was $115K and 3rd Year was $140K (all those numbers are pre-tax, and no, those are not typos).

When things aren’t so good, though, the situation changes a bit…

Number This Year… Really?

The estimates and “confirmed” numbers this year are all over the place – and besides the fact that they’re way down, there’s not much consistency.

The consensus was that top tier 1st Year Analyst bonuses were in the $40-$50K range, 2nd tier bonuses were in the $30-$40K range, and 3rd tier and below varied from “almost nothing” to around $20-$30K.

2nd Years typically received around $10-$15k more per tier, and 3rd Years received about $10-$15K more per tier on top of that.

I’m not going to bother to list these bank by bank, because no one seems to have consistent numbers. The numbers above were gathered from message board postings and news sites like DealBreaker:

One quick note, though: very, very few Analysts are ranked in the “top tier,” especially at larger banks – so 1st Year Analysts earning even $50K for a bonus this year was quite rare.  $30-$40K was far more “typical.”

Our Predictions A Few Months Ago

So, how well did these numbers match our predictions a few months ago? If you recall, I predicted:

  • 1st Year (Top): $30K-$45K
  • 2nd Year (Top): $40K-$60K

And sure enough, most bonuses fell in this range. These predictions were a bit on the low end since some banks actually paid more than $45K for the top 1st Year Analysts, but overall they were in-line.

The “average” 1st Year Analyst at a bank probably earned between $30K and $40K for a bonus this year.

These numbers, by the way, are pre-tax. The actual take-home was much lower, probably around 50% if you’re living in NYC – meaning after-tax bonuses were around $15-$20K this year for the typical 1st Year Analyst.

That’s not much money if you’re living in New York, and compared to the after-tax take-home of $30-$50K 2 years ago, it’s quite depressing.

Base Salary Changes

More interesting than the drop in bonuses, though, is how most banks raised their base salaries at all levels – 1st Years are now making $70K rather than $60K base, 2nd Years will now make $80K rather than $70K base, and so on.

There’s some talk that this is due to increased regulation and uncertainty over what Washington will “allow” as reasonable bonus payments, but I think the answer is far simpler:

It’s just a matter of inflation and adjusting salaries to match the rising cost of living. Base salaries in investment banking haven’t changed much over the past decade or so, while rent and other expenses have increased – so I’m not too surprised that banks have increased base salaries as well.

Some have suggested that banks will continue to raise base salaries in response to falling bonuses and increased regulation, but I doubt that will happen – at least at the Analyst level.

What This Means

Surprisingly, the answer is “not much that we don’t already know.” Even though one of the big lures to finance is the supposedly “risk-free high income,” the past few years have proven that wrong on multiple counts: from falling bonuses to layoffs to bankers fleeing to Buenos Aires and spending their last bit of money on cocaine.

There’s no such thing as a guaranteed way to make a lot of money with no risk. The more you make, the more risk there is, and anything in finance is highly cyclical – you can expect rounds of layoffs every 5 years or so.

The good news, though, is that getting laid off if you’re just out of school doesn’t matter too much in the grand scheme of things.

VPs who get laid off face a much tougher time, because no other job will pay them $500K per year for doing administrative work and proofreading Word documents.

Why You’re Just Going to Ignore This Anyway

Of course, no one is actually going to pay attention to the summary above: even if bonuses dropped to $0 for 10 years in a row, you would still want to go to Goldman Sachs because of the name and the prestige.

All cynicism aside, you should still reconsider going into the industry if your main motivation is immediate piles of cash – because that’s not going to happen these days. Yes, over the long-term finance will pay more than most other options, but it will always be significantly more risky than your average job at a Fortune 500 company.

The Future

So then, what will 2010 bonuses look like?

I would be shocked if they jumped dramatically, but assuming the economy improves a bit, a return to 2008 levels might be plausible.

Personally, I think it will take many years before the economy improves – so a slight change from 2009 numbers is more likely.

And yes, based on recent results Goldman Sachs and JPMorgan are certainly doing better than other banks – but it’s still unlikely that Analyst pay will be significantly different at different banks. It’s a very small percentage of total expenses in the first place.

If you’ve been following the industry and news closely, of course, you should already know all this – and assuming you’re not like those annoying kids in Harold & Kumar asking “what it’s like to be an investment banker” you know that it’s just part of the game.

Historical Bonus Predictions & Actual Numbers

M&I - Brian

About the Author

Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.

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  1. Hi Brian, I was going to post this question on your wardrobe article but I couldn’t – hope here is ok.

    Is a peaked lapel suit jacket appropriate in the office/client meetings? I’m thinking of something charcoal and otherwise conservative like this:


    1. I assume so, but I am literally the worst person on the planet when it comes to fashion advice for business so you may want to check with someone else.

  2. What would be a good city to look at if I eventually want to get into a Latin American Real Estate PE but want a lower cost of living than say NYC?

    1. Houston, except it’s energy-focused.

      If you’re talking about actually going to South America, then Sao Paulo would be best.

  3. What is the dress code for an investment banking analyst and associate at Goldman Sachs? Is it a suit? How about a PE Associate at Blackstone?

    1. Generally just need dress pants + dress shirt, suit is only needed for client meetings for the most part… same in PE, except they’re probably even less formal even at big places. Some offices used to require suits + ties every day but I think that is pretty rare these days.

  4. Through my internship search I was able to develop contacts at all sorts of boutiques through networking. One individual at a NYC boutique I’m interested in told me they weren’t hiring interns but to call him later in the year for full time recruiting. This person does not appear to work at the bank anymore. What should I do now? It seems that he finished his analyst program, so I don’t think it was a layoff. Should I email someone else at the firm telling them about my conversation with him and how I’m still interested, etc? Thanks

    1. That would be kind of weird, I would try to find him on Facebook / LinkedIn etc. and see if you can contact him that way. If not, just reach out to HR at the bank or cold-call someone there.

  5. Hi Brian,

    I’m a summer intern at a bulge bracket right now and your website’s been really helpful. I’m more interested in getting an offer and general advice on the sales and trading front though, could you recommend any related websites similar to yours?


    1. There’s not too much on S&T because it’s an even smaller field than banking. There will be some future articles on it, but keep in mind that finance is an extremely small industry so there’s not much information online to begin with.

  6. Thanks for the article.

    First years at my bank got stub bonuses well under 10k a couple months ago. Is this a bad sign? We appear to be doing well relative to other banks…

    1. I’m assuming you’re at Goldman? It’s not a bad sign, they’re just on a different bonus schedule than everyone else… i.e. bonuses in December rather than July.

      1. I’m at a boutique – I understand the December bonus schedule but my gripe is why we were paid so little compared to Citi/Deutsche/etc now. Was it just due to worse market conditions back then? To be fair, base was already at 70.

        Thanks for your insight.

        1. Hmm, that is quite strange – higher base may have something to do with it, but my guess is you will make up for it this coming year. It’s hard to say since well-known boutiques typically pay on-par with everyone else… at small ones it is a completely different story though.

        2. I have heard Goldman’s stub for 1st years was $7K, which annualized is not a bad number or indication.

  7. Scandibanker

    Hi again, did you find anything on project finance? Kind Regards

    1. I meant that I would look into it for the subject of a future article – it takes quite a bit of time to research these topics. I’ve been tied up with other projects recently, but I’ve made a note to look into it for future article topics.

  8. I also have a “Do I have a chance?” question.

    I am currently finishing a J.D. (finance undergrad) and will probably be starting a corporate finance rotational program with a Fortune 5 in January (five 6-month rotations). If I go some place like UT-Austin (my fiance doesn’t like cold weather) with a 730 GMAT for my MBA, will I get serious consideration from regional banks and energy teams from bigger banks, or is an IB analyst program absolutely necessary?

    1. It’s 100% dependent on your previous work experience. If you have nothing pre-JD and will only have those 2.5 years of finance rotational programs, then you stand a shot but not a great one at going to a large bank. It’s tough to compete with all the former bankers interviewing. To improve your chances, try to do an unpaid/informal internship prior to the MBA program.

  9. Would you say it is any easier to break into investment banking with an energy team in Houston rather than a team in NYC or LA? Also if you go into energy initially, will you basically be stuck in energy for the rest of your career?

    1. If anything, it’s probably a bit easier vs. NYC – maybe a bit easier vs. LA as well, because most people don’t want to move to Houston.

      As you progress within finance, you do get more and more pigeonholed in one area, so yes, you will likely go to an energy-focused PE or HF… doesn’t always happen, but in general finance is pretty bad in terms of forcing you into specific industries if you’ve already worked in one area.

      1. How do you go about seeking out specific cities for recruitment, as opposed to going through the normal NYC superday. Or for full-time recruitment does superday happen at all IB office locations?

        1. Same process at all offices. If you go through OCR, just say where you want to work, and if you’re networking your way in you need to get to know people in the office you’re interested in.

  10. Much appreciated, ht. That does interest me because I would greatly enjoy working outside of the country initially after college if given the opportunity.

    Also, as far as Houston goes, which major investment banks have offices there?

    1. Almost all major BB and MM banks have their energy teams in Houston.

      Also, keep in mind that with working outside the country, you still pay US income taxes if you’re a US citizen. There are some exemptions up to a certain income level, but I don’t think you’d qualify if you go into banking.

      Working internationally is a much better deal if you’re a citizen of that country, though the housing stipend can be nice as well.

  11. P.S. the response above was intended for Dylan, the first poster

  12. I’ve noticed that disposable income is much more in foreign countries with lower tax rates, i.e. HK, Singapore and Dubai. I can tell from personal experience that you can easily save up to 50-60% of your base salary as you get a housing stipend in addition to your base. Your base is the same as it is in the US. The bonuses are lower but not so much lower. In the end, you could save more. You could save even more if your home country doesn’t tax your foreign income.

  13. The University of Texas–Austin

    Is this a target school for IB jobs at the undergraduate and graduate level?

    1. Not as heavily targeted as the Ivy League, but yes, banks still recruit there. I would say “semi-target.”

      1. I have the choice of attending Indiana Kelley or Michigan Ross for undergrad. Which school would you say is more of a target school?

          1. Thank you for the fast response. By the way, this is a great website. It is very informative and helpful. Since I like Indiana’s program better and the campus, you would say go to Indiana right? I know Michigan is more prestigious but getting a job is alot more about the applicant than the school. So it wouldnt be dumb to pick Indiana over Michigan right?

          2. I would not pick Indiana over Michigan if you want to get into investment banking – recruiting is far lower and you will have to put in a lot more effort to break in. Recruiting is more like 50% school, 50% applicant… go to a heavily recruited school and it is 100x easier to get interviews.

          3. Indiana University’s Kelley School arguably places more students on Wall Street than Michigan…about 80/year, one of the highest outside the Ivys (this includes regional offices). Most people don’t realize this.

  14. How exactly are analysts ranked to find out who belongs in the top tier, second tier, etc? I’d be really interested to understand this process very well before I start working.

    1. It’s very random but boils down to who you impress, who you know, and the work you do. Mistakes count against you far more than successes count in your favor. Basically, it’s about not screwing up vs. over-delivering on everything… will see if there’s a way to go into that in more detail in a future article.

  15. Scandibanker

    Hi! Do you have any comments on project finance? Any good resources? How is it compared to M&A? Which banks have the best desks? //

    1. Hmm don’t know a whole lot about Project Finance offhand, but it’s quite a bit different from M&A and generally leads to more specialized opportunities. Will see if I can find anything on it, but the main difference vs. M&A is that you are usually more limited in terms of which PE firms etc. you can go to afterward.

  16. No one will have sympathy of any bankers crying over their bonuses. The dollars still beat almost any other job a recent college grad can get, and at least those who got bonuses have jobs. Even with a strong rebound in the economy, which isn’t looking likely in the next 12-18 months, you’ll need to stick around for a while for any semblance of the glory days to return.

    Gotta Mentor

    1. Well, we can always dream, right?

    2. If most people don’t make banker money, it’s because they don’t deal with the banker stress and hours.

      Although most people won’t sympathize, once you tell them what the role requires, they begin to understand what it takes to make those salaries and bonuses.

  17. What do bonuses look like at middle market and boutique firms, are these bonuses nonexistent?

    1. About the same actually, maybe a bit lower but most well-known MM/boutique banks pay in the same range.

      However, at true regional no-name banks with only 1 office etc. the bonuses are likely to be 30-50% lower if I had to guess.

      No hard #s, but that is based on the fact that extremely small boutique bonuses are usually 50% of what bigger banks pay.

      1. Is there usually a work/life balance tradeoff? I know the salaries/bonuses/hours may be the same at the BB and upper echelon boutiques, but what about the extremely small boutiques? Does that translate into fewer hours?

        1. Honestly not really. Yes, the hours may be somewhat better but they are still unpredictable in that your weekend could instantly get ruined on a moment’s notice. On average they might be a bit better but they’re still far different from a “normal” job.

  18. Just out (although you’ve probably noticed):

    “Goldman set aside $6.65 billion during the second quarter to compensate its 29,400 employees. That brought the total for the first six months of the year to $11.36 billion, up 33% from the comparable period in 2008.”

    Do you think their revenue increase is sustainable? I know nothing about how/when bonuses are paid out, but how does this news affect your forecasts?

    1. Short answer is that those numbers do not really affect Analysts at all – they have more of an impact on the higher-ups.

      And no, 33% revenue growth per year is not sustainable for a company the size of Goldman – as the economy recovers, that growth will flatten. No large company grows at 33% per year over many years (unless it’s Google…).

      1. True, although despite my poor formulation I didn’t mean sustainable revenue in the sense of growing 33% – I meant in the sense of growing at all. i.e., do you feel the industry is regaining strength, or could this well be a one-time type of thing with GS’s (since their data is all I’ve seen recently) revenue tanking again in any of the next few quarters?

        And on a somewhat related note, how do you think the fact that there are much fewer BB IB’s around than last year is going to affect the industry? Supposedly, there’s an extraordinarily large stream of boutique IBs being started up, but personally I doubt boutiques (even established ones) will be able to truly replace BBs at any point. Your thoughts?


        1. Well, I don’t think one good quarter from the strongest bank around is enough to say that the recovery is here.

          In terms of the effect on the industry, I don’t think the boutiques will realistically make much of a dent in the deal flow of bulge bracket banks. You will definitely see some talent fleeing to those smaller places, but the larger banks tend to always attract more new clients than boutiques… so in the long-run there won’t be a dramatic impact.

          I think the biggest difference will be that 2-3 banks will now completely dominate the league tables etc. and no one else will be doing much.

        2. Thanks again for your input.

  19. Analyst 3

    p.s link to debate about London analyst bonuses for anyone who is interested:

  20. Analyst 3

    Good work M&I and spot on, interestingly even allowing for a generous conversion rate the numbers quoted appear similar to what’s been paid out so far in London…although this is only based on the informal evidence I have from friends at other banks.

    I have yet to receive mine but the excitment of 2007 is worringly lacking!

    1. Yeah, I don’t think 2007 is returning anytime soon…

  21. Interesting, as only a rising sophomore in college, I’m not too concerned with these numbers yet as I don’t plan to be employed until 2012. But what location in the US would you say is the best money wise for an investment banker as far as disposable income and cost of living go?

    1. Definitely Houston – cost of living is very low, and the pay is the same everywhere.

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