A surge in M&A and trading activity is set to boost investment banker bonuses by over 20 percent for the third consecutive year, according to a Johnson Associates report.
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Wall Street Bonuses Set for 3rd Straight Rise on Dealmaking Rebound
A rebound in mergers and acquisitions and volatile markets are fueling a third consecutive year of rising bonuses on Wall Street, with investment bankers who advise on deals poised for the biggest gains.
"This year is the year of the banker," Alan Johnson, managing director of Johnson Associates, said in the report. "It's a horse race between trading and M&A."
Incentive pay for investment bankers who advise corporate clients on deals is projected to climb by 10 percent to 20 percent or more from a year earlier, according to a report from compensation consultant Johnson Associates Inc. Underwriters for equity offerings could see their bonuses jump by as much as 20 percent. The optimistic forecast follows a strong 2025, when M&A activity rebounded, a trend that has continued into a record-breaking first quarter for many large banks.
The gains are not evenly distributed. Equity traders are expected to see bonuses rise by 10 to 15 percent, while their fixed-income counterparts are looking at a 5 to 10 percent increase. In contrast, those in the private credit space may only see bonuses that are flat or up a mere 5 percent amid intensifying competition.
Deals and Volatility Drive Profits
The primary engine for the bonus boom is the resurgence of dealmaking. After a dormant period, M&A has returned, providing a significant revenue stream for banks. This was evident in the first quarter of 2026, where several major banks reported their most profitable quarters ever, largely driven by advisory fees.
Market volatility, initially seen as a risk, has turned into a source of profit. Heightened uncertainty has compelled institutional clients to increase their trading frequency and position sizes to hedge their portfolios, directly boosting the trading revenues of investment banks.
Clouds on the Horizon
Despite the positive outlook, there are significant risks that could derail the bonus bonanza. "We're in the middle of a war, and that's a huge wild card," Johnson said, referring to the potential for geopolitical conflicts to escalate.
Furthermore, US regulators are pushing for stricter capital requirements. The "Basel" proposal would require banks to hold capital against 10% of unused credit lines, which could force them to reduce credit limits and impact profitability. While the Federal Reserve has relaxed its initial proposal, large banks like JPMorgan Chase still anticipate a capital increase. The industry continues to lobby for relief, but the outcome remains uncertain, especially with the upcoming US election.
According to an estimate from New York State Comptroller Thomas DiNapoli, the Wall Street bonus pool reached a record $49.2 billion in 2025, with the average bonus hitting $246,900, a 6 percent increase from the previous year. While 2026 is shaping up to potentially exceed that, the confluence of war, inflation, interest rates, and regulatory changes presents a complex and uncertain future.
This article is for informational purposes only and does not constitute investment advice.
[1] For the third consecutive year, Wall Street bonus pools are set to surge, as 'war and volatility' unexpectedly turn into a money-printing machine.[2] Wall Street Poised for Bonus Increases in ‘Year of the Bank’[3] Focus: Wall Street banks plan final push on capital rules[4] Wall Street bankers on pace for big pay bumps in 2026 amid AI gold rush[5] Wall Street pay surges as AI boom fuels dealmaking
