by Brian DeChesare Comments (54)

2013 Investment Banking Bonus Predictions: Quantitative Fleecing?

Let’s start with the good news: bonuses are almost certainly going up by 10-20% this year.

Look at the numbers, our analysis below, and other sources, and you can’t help but draw that conclusion.

The bad news?

The irresponsible policies of central banks around the world, led by the lunatic-in-charge at the Fed here in the US, mean that those higher bonuses could be worth… nothing in the near future.

So I hope you’re buying land, cows, dragons, Bitcoins, or something else that will increase in value even if the USD and other currencies come crashing down.

But before we get into the doom and gloom, let’s start with a visual:

If you’re reading this via email, click here to view the infographic and click here to view the Large version (or just click on the graphic itself).

2013 Investment Banking Bonus Predictions

The World At Large This Year

As you can tell, I’m not a fan of fiscal and monetary policy decisions in the US over the past few years.

Even if you accept that interest rates should be reduced and that the government should intervene in the economy when a recession hits, should they really keep at it for over four years?

Especially when there is little to no evidence that these policies have produced job growth or boosted the economy out of its anemic state (yes, maybe at first they “stabilized” things, but what good has any of it done recently?).

If I had to pick a theme for the past few years, it would be disparity:

  • The S&P 500 has increased at a 15% annualized rate from the end of 2008 through the end of 2012 – great for everyone, right?!
  • Wrong, because real GDP growth has averaged 1.5% since then, compared to a historical average of 3.2% since 1929.
  • And yes, unemployment is “down” from 10.0% in October 2009 to 7.5% in April 2013… but only if you ignore the fact that the labor force participation rate has fallen from 65.0% to 63.3% in that same time.
  • Performance on a state-by-state level is very mixed: witness Nebraska with a 3.3% unemployment rate due to the shale energy boom, or even Texas with a 6.4% unemployment rate… vs. California, with a 9.0% rate.

Oh, and this “recovery” in the housing market is just another case of the government irresponsibly pouring in money to re-inflate a burst bubble. Of course more people will buy houses if you keep interest rates artificially low and guarantee all mortgages… what else would you expect?

Outside the US, the picture doesn’t look much better. Europe continues its spiral into death and irrelevancy, and while there are a few places doing better than the rest (Germany and northern Europe), it’s hard to look past a 12%+ unemployment rate and shrinking GDPs in most of these countries.

And then there’s the whole issue of “deposit taxes” and mysteriously losing a portion of your savings overnight due to an incompetent government, but as long as you stay out of Cyprus you should be OK, right? Right? (See my comment at the top about land, cows, dragons, and Bitcoins)

As a cherry on top, even the BRICs are suffering now: China made big waves a few months ago when data showed slowing growth and falling industrial output. Even with a weak economy, horrible fiscal and monetary policy, and an anemic “recovery,” the US might not be surpassed by China anytime soon.

Other emerging markets – see Brazil and India – are not doing much better, either.

Oh well, at least things might be looking up in Mexico and… Nigeria, apparently.

Assumptions and Sources & Uses

You know how this one works: you’ve seen it in all the bonus predictions over the past 5 years.

We’re assuming here that bonuses are directly tied to banks’ investment banking revenue – all revenue from other sources (trading, brokerage, asset management, commercial banking, etc.) is excluded.

Historically, compensation as a percentage of IB revenue has been between 40% and 50%, but this has been falling and will continue to fall in the future.

To get these numbers, we can only use publicly traded banks – that’s why there are no numbers for Moelis, Perella Weinberg, Centerview, and so on. Some banks have also been acquired or merged over the years, which is why this set changes from year to year.

Analysts at most banks – one exception now is Goldman Sachs – are still paid in the summer, so we use the Trailing Twelve Months (TTM) numbers from March 31, 2012, through March 31, 2013 as a proxy for the June 30, 2012 – June 30, 2013 numbers, which are not yet available.

Accuracy in the Past?

This method has been remarkably accurate in the past – here’s a summary of our predictions vs. actual numbers from 2008 through 2012:

IB Bonus Predictions vs. Actuals, 2008 - 2012

Show Me the Numbers

Let’s start with the bulge bracket performance first:

2013 IB Bonus Predictions - Bulge Brackets

I don’t have a great explanation for JP Morgan’s numbers, but I highly doubt they had anything to do with the “London whale.”

Even some of the “weaker” banks in this list showed solid growth, though generally the past 12 months were stronger than the most recent quarter.

And then to our beloved boutique and middle market banks:

2013 IB Bonus Predictions - Boutique and Middle Market Firms

This list was impacted by acquisitions and shut-downs (see: Gleacher) and is generally more volatile than the bulge bracket numbers. The median increase is definitely lower, but revenue still increased at most of these places.

I may change around this list next year and beyond and swap in new firms – the relatively small sample size here is not ideal given the huge spread in the numbers.

The Bottom Line

Based on these numbers, we’re predicting a 10-20% increase over last year’s bonus figures. This may be less true at the Associate level and in other industries / levels (see below). To refresh your memory, here was actual 2012 compensation:

  • 2012 1st Year Top Tier Bonus: $50-60K USD
  • 2012 2nd Year Top Tier Bonus: $65-75K USD
  • 2012 3rd Year Top Tier Bonus: $85-95K USD

Those are JUST bonus numbers. Here were the total compensation figures:

  • 2012 1st Year Top Tier Compensation: $120-130K USD
  • 2012 2nd Year Top Tier Compensation: $145-155K USD
  • 2012 3rd Year Top Tier Compensation: $175-185K USD

So here are the 2013 predictions:

  • Predicted 2013 1st Year Top Tier Bonus: $58-68K USD
  • Predicted 2013 2nd Year Top Tier Bonus: $75-85K USD
  • Predicted 2013 3rd Year Top Tier Bonus: $100-110K USD

And then the predicted 2013 total compensation:

  • Predicted 2013 1st Year Top Tier Compensation: $128-138K USD
  • Predicted 2013 2nd Year Top Tier Compensation: $155-165K USD
  • Predicted 2013 3rd Year Top Tier Compensation: $190-200K USD

Hey, not bad for entry-level positions… but let’s also be clear: these are the top tier numbers.

Most analysts at banks will receive compensation lower than this, because relatively few receive these top tier numbers – especially when the economy is questionable.

Other Regions, Levels, and Industries

Someone always asks about this. The short answer: it costs too much time and money to gather and verify all this data, and I have no interest in publishing paid compensation reports.

Plenty of other places do compensation reports – I would strongly recommend the Job Search Digest reports for more on private equity and hedge fund pay.

No, they are not “cheap,” but you get what you pay for: think about how valuable these reports would be in salary negotiations for a job offer that pays hundreds of thousands of dollars.

If you are a sophomore in university, these reports are NOT for you – they are intended for experienced professionals who want the best data possible to negotiate better compensation for themselves.

Here are some stats on PE pay in 2013 (based on 2012 performance). The key takeaways: average pay was up 16%, average compensation across all levels was $273K, and 59% of firms expect to increase their hiring this year.

Here are the stats for hedge fund pay in 2013. Average pay was up 15%, average compensation was $314K, and it looks like you’ll still be working 50-70 hours per week (or more).

I don’t have much to share on compensation in other regions or predictions for those regions, but the basic differences are that some places have higher base salaries and lower bonuses, there may be free company housing in some places, and some countries such as Brazil actually pay above market rates due to the lack of qualified talent in the region.

Other Trends This Year

Many of the trends from past years will continue this year: bonus caps at both banks and hedge funds, deferred pay, and even compensation tied to Basel III capital requirements (as if to put another nail in the coffin of UBS).

There have also been some “disturbing reports” from certain banks and groups about people getting screwed in various ways:

The message is clear: be careful where you work, attempt to move to the buy-side as soon as possible, and don’t even think about pursuing an alternate career path as a stripper in London.

Pay at the Very Top

We always get a few questions about how pay changes at the senior levels, and the answer is always the same: it fluctuates tremendously from year to year depending on the bank’s performance and the perception of the CEO’s performance (and that of other senior executives).

Just to illustrate this point, here’s how much senior-level compensation varied this year:

So as you can see, compensation for senior-level bankers won’t necessarily follow firm performance or even the size of the firm.

Predictable is just plain boring.

Outlook for Next Year and Beyond

Most sources seem to be in agreement that pay growth this year will be solid. I am more optimistic about PE / VC / HF pay increasing this year into next.

But I am extremely skeptical that this “rebound” in the overall economy is real – or even that it was real – because the underlying fundamentals are poor, the true employment situation has not improved, and neither the US nor Europe are implementing reforms required to fix the economy.

Any number of catalysts could push everything off the cliff next year or beyond:

  • Full implementation of the healthcare “reform” in the US (don’t even get me started about how stupid this legislation is – maybe I should write about it separately…).
  • Continued slow-down in emerging markets and worsening demographics in China.
  • Another “deposit tax” in Europe? More bailouts? Who knows.

But let’s see where the final numbers come in this year first.

And let’s hope I’m wrong about everything above – for the sake of your future bonus.

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. Thanks for the interesting article.

  2. Since base pay has gone up, washed up (and out) IBers have a much better landing in the company finance world! Back in the day, they would have left IB into corp strategy role with a 95k base…at leats now its 140-160.
    We got nothing…..this sucks..

  3. when will this come out for 2014? am curious as the year started off slow but the market is seeing quite a bit of activity in the past months

    1. Predictions will be out in May.

  4. Thanks Nicole :)

    1. M&I - Nicole

      You’re welcome.

  5. Could you give an idea of bonuses in equity research this year, in bulge brackets as well as small boutiques? I just started in ER and I’d like to know what kind of bonus my company gives + what ppl in ER are making at other companies. Thanks.

    1. M&I - Nicole may give you a better idea. I don’t have the 2013/2014 numbers, but this article should give you a ballpark.

  6. Are bonuses in SF lower than NYC? I just received an offer from Goldman TMT in SF (2014 analyst class), and while giving me the offer details they told me I could expect a total compensation of $120K for my first year. 70 base, 10 sign in and 40 ‘discretionary’ bonus. And they made sure to mention the discretionary bonus was of course…discretionary. The package seemed a bit disappointing given the so called prestige of the GS TMT group. Is this because of location?

    1. M&I - Nicole

      I think its probably because of deal flow. I am not 100% sure though I don’t think salary of TMT in SF would be lower than that in NYC. And yes sometimes prestigious firms pay less than other less prestigious firms because they know many candidates would want to work for them and they can afford to do so.

  7. when will a report on the actual numbers come out?

  8. Great info. Is there a comprehensive list of anticipated 2013 bonus schedules for each BB and MM?

    1. No, but some recruiting firms publish reports on the actual numbers for individual banks each year. It’s difficult to offer predictions by the individual bank because a huge difference in revenue growth % does not necessarily imply a similar difference in compensation growth or decline at the same bank.

  9. Also one more question regarding S&T: as analysts does desk performance affect your figure at all or is it solely based on tiering?

    1. Desk performance factors into it, but more so as you move up past the entry-level. There is little impact if you’re a 1st year analyst there.

  10. How far off (if at all) would these numbers be for S&T analysts at BBs?

    1. These were spot on for at least one BB’s S&T :)

    2. As Fred mentioned, pay can be similar for 1st year S&T and IB analysts. But there is probably some type of small difference at the very least, especially across different banks.

  11. Hi Brian,

    Thanks for the interesting article. I am in the process of choosing a group for my full time at a BB which starts soon. I wanted some feedback from you on Real estate group. I have worked there as an intern and love the people in that group, however I am not sure of the exit opportunities and whether it is seen as a nice group on Wall street. A RE banker is a RE banker for life! How true is that?

    1. There is truth to that – see:

      I’d say if you’re interested in doing something outside of RE, either move to another group or work in that group and try to transfer to another group at the end of one year.

    2. M&I - Nicole

      In terms of exit opportunities within real estate, REITs are a common destination for analysts; some people also move onto real estate private equity firms or hedge fund. If you want to move elsewhere, you need to demonstrate interest in other areas by researching them, reading sector pages, and reading the articles on this site about other groups, areas, and regions. Recruiters are more likely to get you interviews with real estate-related groups. With the above being said, if you switch relatively early (1-3 years) it is less likely that you will be pigeon-holed because you’re still considered junior and “willing & able to learn.”

      1. I forgot to mention that I would be joining as an Associate. Would this hinder if I want to join REITs later on?

        1. Not really, it’s fairly straightforward to go from RE IB to REIT even as an Associate. It gets harder to move into PE the longer you stay in banking, though.

  12. Any data on lower-tier bonus? In addition, what type of disparity is there between groups in the same bank? Thank you!

    1. Don’t have data on lower-tier bonuses, but there is generally not too much of a disparity between different groups at the analyst level. If one group has performed terribly, there might be – but otherwise you don’t see huge differences.

  13. Brian,

    Thanks for the great post – with bonus season season rapidly approaching, it’s always nice to see a few data points to alleviate some of the anticipation.

    Any thougths on numbers for a top MM? Blair/Baird/Stephens/STRH/Harris Williams/Raymond James? (either raw or as a % of street above)

    Kind regards,


    1. Hmm, usually they are at a small discount to the bulge bracket numbers so I would anticipate the same treatment this year.

      Really, all banks in the US should pay more than last year – but with some of those, it might be more like a 5-10% increase unless I’m missing something or one of them has done especially well.

  14. Brian,

    Do you typically see a lot of 1st yr analyst quit right after their bonus hits the bank? Who will they be replaced by? Experienced hires/laterals? Will these laterals be hired as 1st or 2nd yr analysts?

    I’m in a situation where I’m interning post-grad in a boutique IB and hoping to lateral in somewhere full-time hopefully around Aug/Sept when bonuses hit. Does this sound like a good/feasible plan?

    1. M&I - Nicole

      Yes some 1st years quit after bonus. They may be replaced by laterals, internal hires, or perhaps not replaced depending on the firm’s needs/direction.

      Yes you should start networking if you haven’t been doing so already, though I don’t think bonuses are around Aug/Sept.

  15. I am also from Canada and I can confirm M&A activity is screwed:

    M&A bonuses will drop in Canada.

    1. Thanks for adding that, it will be interesting to see what the differential is vs. US numbers.

  16. wilhelmson

    #’s from Canada this year are going to be awful — M&A activity is way down, pipeline is dry and issuance is primarily for refis vs. new money. Expecting RBC and other related shops with activities down south to be affected by the motherships.

    1. Interesting, thanks for sharing. Hope it’s less of a disaster than what you described.

  17. I’d love to hear your thoughts on the healthcare “reform”. Definitely worth a separate post.

    1. Thanks! I am thinking about covering it in the next few months.

  18. Ricky JF


    I know you’re busy but do you have time to provide an abbreviated version of why you think the central banks around the world are not rebounding the economy with the right policies? Would be great to hear your thoughts.


    1. They haven’t worked because the monetary velocity hasn’t increased (see: The logic of these “easy money” policies is that by putting more funding out there, eventually it will trickle down into the rest of the economy and everyone will benefit from more jobs and higher spending.

      But that hasn’t happened – instead, banks are just keeping the cash on their balance sheets because borrowing is way down (see:

      So effectively central banks have created a lot of extra money out of thin air, but very little of it has flowed into the real economy. These types of policies might work if the economy were constrained by a lack of credit – but that is not the case, at least not anymore.

      1. What’s interesting is even during the credit crisis this easy money policy (aka quantitative easing) did not end up trickling down into the rest of the economy – the banks used the cash to shore up holes in their balance sheets. During this time period, the fed effectively paid banks to take loans with 0% interest rates. The smart banks then loaned that money back to the government by buying T-bills and earned risk free profits.

        As Brian mentioned, the problem now is the banks have a ton of cash on hand and no one to lend it to. The solution? The fed is purchasing Mortgage Backed Securities so the values of American homes will rise, Americans will be “wealthier,” and therefore more worthy of credit. Homeowners will then take that home equity line of credit and buy consumer goods and services (or so the theory goes).

        Does this sound familiar to anyone? :)

        Brian, when do you think it all comes crashing down?

        Also, when is part 3 of your story?

        1. Yes, exactly. I think it will come crashing down within the next year, but it really depends on if the overall economy slows even more first before everyone notices the bubble.

          Part 3: I’m aiming for within the next month.

  19. I am currently at a BB in ECM as a summer analyst and am not sure whether to come back FT if given the offer or try to move to a coverage group. I can try to do 2 years in ECM and move to the associate role in a coverage group (which many have done in the past), or exit banking completely. Also, how much would bonuses differ by in ECM, especially given how hot the market is right now? Thanks!

    1. I don’t think bonuses at the junior levels would differ by a huge amount, especially this year. I would probably take the FT offer unless you already know people in a specific coverage group and can network/interview your way into that group reasonably well.

  20. Decisions Decisions

    Hi Brian,

    Just need some advice. Am in a bit of a complicated situation at the moment. I left my old MM firm after 2 years as an analyst without finding a job somewhere else first (please don’t ask why – it was a complicated situation…). I went travelling for five months, and came back and have applied for buy side and corporate development roles (its been around 2 months since I got back from traveling). I have not had much luck. I have however been offered a place at a very niche small sector specific boutique. Third year analyst level. They appear reputable with a solid track record. Should I take this role? Problem with declining it and continuing to try for buy side / corporate development roles while out of work, is that the gap on my resume will get bigger and bigger, potentially making the situation worse,. Easier to find a new job while working than not. What do you think? My preference was really to not go back into M&A, but I will do it if its my best option for now.

    1. Personally, I would take the role – better to get the experience and avoid more of a gap on your resume. Unless there’s something really bad about the firm, you lose out more by continuing to not work during this time.

  21. Solid points as always. I would LOVE to read your take on the healthcare reform

    1. Thanks! Will add that one to the list…

    2. Agree!

  22. What about associates?

    1. They are not paid in the summer and there’s less data available, so we don’t consider them here. If you look at some of the links, there are reported numbers there. Average bonus should be around 100% of base salary for associates.

      Here were BoA’s numbers, which were well below average from what others have stated:

      1. thanks

      2. Marty McSwag

        Brian — if Associates don’t get their numbers til August why did BAML & other report around the January timeframe? I guess I’m confused on the timing…

        1. “They are not paid in the summer” from the comment above. Everyone above the Analyst level is paid at the start of the year. So that’s why numbers were reported for other levels earlier this year.

    2. I’m intersted in this too…being an MBA student targeting IB.

      1. Thanks – we’ll try to get more data on associate pay for the actual bonus numbers in August.

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