Wall Street bankers brace for bonus cuts

By Joseph A. Giannone - Analysis

NEW YORK (Reuters) - Bankers and traders are bracing for sharply reduced bonuses amid one of the worst downturns ever -- and they will be the lucky ones.

With more than 75,000 jobs already cut and more than $400 billion of credit losses, the proverbial blood is flowing on Wall Street. And while there are still four to five months left in the year, annual bonuses representing the bulk of Wall Street pay are expected to fall by 30 to 40 percent, recruiters and compensation experts said.

Given the environment, there may be little choice but to accept the cuts and hope for a 2009 rebound.

"It's clearly a buyers' market," said Robert Sloan, head of the U.S. financial services recruiting practice at Egon Zehnder International. "The assumption going into this year is you can take your base salary or severance. That's the choice. There's a resignation in the market."

Wall Street firms typically pay out about half their revenue as compensation. Based on performance so far this year, a period that saw Bear Stearns fall off the map, payouts are poised to fall hard.

Morgan Stanley (MS.N) last month said its first-half revenue fell 28 percent, and the funds set aside for compensation dropped at the same rate to $7.03 billion. Goldman Sachs (GS.N) revenue fell 22 percent, with the compensation pool down 23 percent to $8.5 billion.

Last week, New York state officials estimated total bonus payments from the nation's financial hub would plunge 20 percent, removing billions of dollars from the tax rolls.

"Things have been bleak," said Brent Longnecker, chief executive of Longnecker & Associates, a compensation firm.