Scratch the Manhattan pied-à-terre this year.
Wall Street traders, among the best paid in financial circles, are facing another meager bonus season this year — at least by Street standards — after a rough 2011 saw bonuses slashed by as much as 30 percent.
Although some groups will fare better than others, equity traders could see their prized bonuses shredded again in 2012 — by as much as 35 percent, according to recruiters and others.
In addition to lower bonuses, Wall Streeters are likely to see less of the payout in cash and more in stock — with the stock facing longer deferral periods, one recruiter, Michael Karp, co-founder of Options Group, said.
Deutsche Bank has already moved from three-year deferral periods to stricter five-year deferrals and it’s expected that other banks will follow suit.
Typically traders are some of the highest-paid staffers at banks, capable of fetching seven- and eight-figure bonuses in plush times. But banks are facing many regulatory and market headwinds that are placing a damper on their profit centers.
“A lot of the banks are reviewing pay-out structures and considering their options,” said one bank source.
“The equity execution business still remains a challenge for banks,” said Sanford Bernstein analyst Brad Hintz. “[Banks] are just not making money on customer execution,” the analyst noted.
A report last year by New York State Comptroller Tom DiNapoli showed the average Wall Street bonus shrank by 13 percent from 2010, to roughly $121,000– but that included all personnel.
While most expect another down year for Wall Street bonuses, there is still more than two months to turn things around.
More clarity in bank performance will be had later this week when biggies JPMorgan Chase and Wells Fargo kick off third-quarter profits season. Goldman Sachs, Morgan Stanley and Bank of America follow next week.
Already in the doldrums over the past few years, paltry equity trading volumes, exacerbated by technical blunders like Knight Capital’s $440 million trading snafu, have contributed to weak results and lower equity pay, sources say.
The weakness in equity trading is in contrast to much stronger performance among fixed-income traders, who are likely to see bonuses flat to up 5 to 7 percent over last year.
“The macro picture [in pay] is that in the global markets fixed income has performed much better than equities so far this year,” Karp noted.
Strong performing areas within fixed-income units, which structure and shop bonds and other complex instruments like derivatives, include energy trading, foreign exchange trading and interest-rate products.