2012 Bonus Recap: Investment Banking Bonuses Go Bust?
So we decided to do something a little… different for bonus news this year.
And no, not just because everyone was expecting bonuses to collapse in a fiery apocalypse.
What actually happened was far less destructive: bonuses decreased by less than what many people were expecting, and our predictions from a few months ago were almost 100% accurate.
Investment Banking Bonuses: 2007 to 2012
Here it is in all its glory: our very first infographic.
And it’s on a topic that you might just be slightly interested in (click the image below to view the Large version… or click right here).
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Show Me the Numbers
Numbers varied within each tier this year, but here were the general ranges:
- 1st Year Top Tier: $50-60K USD
- 2nd Year Top Tier: $65-75K USD
- 3rd Year Top Tier: $85-95K USD
Coincidentally, these numbers may remind you of our 2012 bonus predictions were almost 100% correct (no need for gifts or applause, thanks).
Base salaries at large banks were $70K USD for 1st year analysts, $80K for 2nd year analysts, and $90K for 3rd year analysts – so all-in compensation was $120-130K for 1st year analysts, $145-155K for 2nd year analysts, and $175-185K for 3rd year analysts.
The range in bonuses was also enormous this year, with pay varying from $20K (or less?) to $50K as you went from bottom tier to top tier. Well, except at Wells Fargo apparently (really? what?).
Here’s more on the numbers from Dealbreaker:
If you want to report different numbers or write in to report what bonuses looked like in other regions, go ahead.
If you’re wondering about the hedge fund and private equity numbers, those are all from Job Search Digest and the annual compensation surveys they conduct.
So What Happened?
The usual: there was a 25% decrease in deal activity in the first half of 2012, the “recovery” in the US continued to be slower than expected (can you even call it a recovery?), and Europe somehow got even worse as leaders there continued to embrace failed policies.
Emerging markets fared a little better, but even they suffered from slower-than-expected growth as various crises all over the world reduced demand for exports.
Altogether, it was a great year for everyone!
Why Hasn’t Pay Fallen By That Much, Relatively Speaking?
Looking at all the data above and considering how poorly the economy has performed the past few years, you might now be wondering, “Wait a minute, how has pay held up so… decently… if things are this bad?”
There are a few ways to think about that one:
- Bonuses are not 100% correlated to the general economy – they’re not even close to 100% correlated, in fact, since companies still do deals and raise capital even if consumers are suffering.
- Hedge fund pay has actually increased over 20% since 2007, and even average PE pay has increased over 10%. That is mostly because they still remain lightly regulated and haven’t drawn government officials’ wrath – plus, they are not as dependent on companies doing deals. Once your fund is raised, you keep getting paid… unless the fund collapses, of course.
Or you could just take all of this as a sign that you should forget about banking altogether and just move to a hedge fund (you might even get to retire early and travel the world).
Predictions for Next Year
On the investment banking side, huge changes are unlikely because… well, pay has not really changed that much since the massive fall-off after 2007, and the economy seems unlikely to improve significantly in less than a year.
Hedge fund and private equity pay will also hold up for the foreseeable future, but it’s unlikely to increase by a huge amount this year into next year.
Even John Paulson has been struggling, after all.
Increasing the tax rate on carried interest would make a big impact on pay, but even if that somehow passes and becomes a law it will still take years to take effect.
So you should be safe once you make that elusive exit to the $20 billion fund you’ve been eyeing.
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
- 2015 Investment Banking Bonus Predictions | Actual Numbers
- 2016 Investment Banking Bonus Predictions | Actual Numbers
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