Morning Coffee: Cruel disappointment for bankers briefly hopeful about bonuses. Goldman Sachs bankers to be spared ice bath humiliation
As the saying goes, you can always take a bit more despair – it’s the hope that kills you. That’s certainly how equity capital markets bankers are likely to be feeling. After a brief period of joy surrounding the ARM and Instacart IPOs, the market seems to have crunched shut again, and the fourth quarter is expected to be “a little bit weaker” than the run rate for the year, according to Bloomberg Intelligence.
The aggravating thing is that ECM teams can at least say that their revenues are up on last year, something which M&A bankers certainly can’t. In some firms, the equity capital markets teams will be the undoubted stars in revenue growth terms – across the top eight banks, the total fee pool was up 13% for the first nine months, but Goldman Sachs, for example, delivered $901m of equity underwriting revenue, up 42% on 2022.
But there are two big problems which mean that this isn’t likely to translate into bonus payments. First, the growth this year is against an extremely easy base for comparison – 2022 was the worst year since the early 2000s. Although it’s up on last year, 2023 revenue is tracking to still be down more than 50% versus 2021; that's not going to bring bonuses to respectable levels.
But more fundamentally, as any banker who has been through a few cycles will tell you, the size of the pie matters much more than the angle of the slice. It is much better to have an average year when everyone is doing well, than a fantastic year when everyone is doing badly. Even the bankers who landed the few big deals of the year will be aware that there are other claims on the fee income they generated. Even if they could prevent revenues from being shared out between pools at the compensation committee,
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