Johnson Associates Inc., a consulting firm that tracks pay across the finance industry, now expects bonuses for investment and commercial bankers to climb 10% to 15% or more. The reason comes down to pure performance. These bankers are simply outearning their peers in other corners of finance.
Those figures exclude carried interest, the profit share that private equity partners collect. Equities traders, sales staff and underwriters could see incentive pay rise 30% or more, the largest increase across the industry.
This all follows a stretch of unusually strong earnings. The largest banks just turned in record second-quarter profits. Trading, deal advisory and underwriting did the heavy lifting.
The deal market spent a long stretch stuck in neutral. That wait may be paying off.
Alan Johnson, managing director of Johnson Associates, said a backlog of deals built up during the long M&A lull is now turning into real transactions. "The work is finally happening," he said.
"The banks have continued to do well, but I think we expected trading and M&A to cool off and it really hasn't," Johnson said.
One deal shows just how lucrative this can be. SpaceX's IPO created $500 million in total Wall Street fees. Goldman Sachs and Morgan Stanley each collected about $100 million as joint lead underwriters, while Bank of America, Citigroup and JPMorgan Chase & Co. each took home $75 million.
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Market turbulence is part of the story too. Shifting Trump administration policies, the Middle East conflict and changing rate expectations have kept markets active and trading desks busy. Fixed-income traders will not be left out, though their bump is smaller at 7.5% to 12.5%.
Johnson said the economy has remained surprisingly strong even with ongoing wars and higher interest rates. "We have marched on regardless of things that would have slowed or brought things to a halt," he said.
Here is the catch buried in the good news: banks are using AI-driven productivity gains to cut staff.
Johnson expects more AI investment to lead to further headcount reductions. The workers who keep their jobs will get paid more and receive more mentoring, but getting a job in the first place will get harder.
"The people that survive are going to make more," Johnson said. "It will be a very good pay market, but not a lot of net new hiring," he added.
Chris Connors, managing director at Johnson Associates, said in a video that bankers could be heading toward one of their best years.
Not every corner of finance is celebrating. Traditional asset managers have benefited from rising markets, and hedge funds just had their strongest quarter for new money in two decades. Private equity is wrestling with difficult fundraising, fewer exits and capital distributions at record lows.
Large private equity firms may see bonus payouts rise modestly at 2.5% to 7.5%, while smaller and mid-sized firms' bonuses are expected to stay flat. The private-credit segment might see bonuses shrink by up to 10%.
The strength on Wall Street is not just a trading story. Johnson Associates expects the broader finance industry to remain solid for the rest of 2026 because the pipelines and the economy are in decent shape. The projection, dated August 5, 2026, sees geopolitical turbulence and credit pressure staying as major forces through the rest of the year.
For investors, the rising bonus pool is a signal about the health of the market. When banks are paying out more, it usually means money is moving. The other signal comes from the AI-driven cost cutting.
Banks that are profitable and lean are likely to stay that way.
"The path is pretty clear at this point," Johnson said.
A strong finance sector and an active deal market often point to an economy that is still growing. The volatility that makes headlines feel scary is, for Wall Street, the exact thing that pays the bills.
This bonus growth is a continuation of that momentum for an industry that spent a long stretch stuck in a deal drought.
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