Jefferies has cut bonuses for dealmakers by up to 25% as investment banks look to keep a lid on costs amid a slump in activity.

The independent investment bank, which has been bulking out its senior ranks over the past two years, told dealmakers their bonuses for 2022 this week. Those contacted by Financial News said that the pool had slipped by 20-25% compared to a year earlier, when banks paid out bumper bonuses as deal fees spiralled to new highs.

Jefferies executives had warned staff that this year’s bonus season would be “difficult” in a note sent on 1 December. Chief executive Rich Handler and president Brian Friedman said that the more challenging environment, together with Jefferies’ hiring spree over the past three years, was likely to mean bonuses will be reduced.

“Let’s just spell it out here: ‘This is going to be a more difficult compensation season at Jefferies, just like it will be for every firm in our industry,'” the executives wrote.

Jefferies increased total compensation for its investment bankers by 22% to $3bn last year, according to accounts.

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Some Jefferies dealmakers said that they had received a bigger bonus year on year, but added that recent hires and market conditions had weighed on the overall pool.

“Anyone who made money this year was paid well,” said one senior dealmaker, who declined to go on record.

A Jefferies spokesperson declined to comment.

Jefferies pays its bonuses before its larger Wall Street rivals, which typically hand out payments in January and February. In a stellar year for dealmaking in 2021, banks handed out 40-50% bonus increases for top bankers, but are set to make deep cuts to 2022 payments.

Goldman Sachs is weighing cuts of up to 40% for its investment bankers this year, the Financial Timesreported on 14 December.

Bank of America, Citigroup and JPMorgan are set to cut bonuses for dealmakers by up to 30%, according to people familiar with the matter. An influx of new hires last year, often brought in with guaranteed bonuses, are also making cutting the bonus pool more complex, FN reported, and many dealmakers are expected to receive nothing this year.

Jefferies has continued to add senior bankers in 2022 after a hiring spree over the past three years that has seen its managing director ranks swell by 36% to 220 people. It named Andrea Donzelli head of its Italian business on 12 December, FN reported, and hired a number of senior dealmakers in Emea this year.

Wall Street compensation consultants Johnson Associates have predicted a bonus decline of 45% for bankers in capital markets functions this year — the biggest fall of any sector — and by 15-20% for M&A dealmakers. Investment banking fees have tumbled by 42% in 2022, according to data provider Dealogic.

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To contact the author of this story with feedback or news, email Paul Clarke

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