Investment Banker Salary and Bonus Report: 2022 Update
About the Author
Brian DeChesare is the Founder of Mergers & Inquisitions and Breaking Into Wall Street. In his spare time, he enjoys memorizing obscure Excel functions, editing resumes, obsessing over TV shows, traveling like a drug dealer, and defeating Sauron.
HOMEINVESTMENT BANKINGINVESTMENT BANKING - ON THE JOB
by Brian DeChesare
I did not expect to revisit investment banker salary and bonus data for a while, but the banks ruined my plans by changing base salaries multiple times in less than a year.
Unfortunately, that has made it difficult to determine the “average ranges.”
As a result, I am listing below the new base salary ranges for U.S.-based roles at large banks as of early 2022, along with total compensation from 2021.
This is slightly confusing/inconsistent, but I don’t believe that total compensation will change much with these new, higher base salaries (see below), so I’m sticking with this method:
Position TitleTypical Age RangeBase Salary (USD)Total Compensation (USD)Timeframe for PromotionAnalyst22-27$100-$125K$150-$250K2-3 yearsAssociate25-35$175-$225K$300-$550K3-4 yearsVice President (VP)28-40$250-$300K$500-$900K3-4 yearsDirector / Senior Vice President (SVP)32-45$300-$350K$800-$1,200K2-3 yearsManaging Director (MD)35-50$400-$600K$1,000-$3,000K+N/A
NOTE: All numbers are pre-tax and include base salaries and year-end bonuses, but not signing/relocation bonuses, stub bonuses, benefits, etc.
Yes, these are substantial pay increases for most levels.
But the ranges are also much wider now.
Before you leave an angry comment to say that you or your friend earned above or below these numbers, I want to offer a quick explanation:
Investment Banker Salary Changes vs. 2021 and 2020
I am giving very wide ranges for the compensation here because:
Midway through 2021, banks increased base salaries for Analysts from $85K – $95K to $100K – $110K. And then, in January 2022, many banks increased Analyst base salaries again so that 1st Years earn $110K and 2nd Years earn $125K.
Meanwhile, banks increased the base salary progression for Associates from $150K – $200K to $175K – $225K.
And then various banks also increased base salaries for VPs, Directors, and even MDs.
Finally, different banks paid very different bonuses over the past 12 months, even to “top performers” at the same level. More on this below.
Here’s an example of the specific problem that all these factors create.
Let’s say that a Year 1 Analyst in 2021 reported a bonus of $80K.
This Year 1 Analyst was on an $85k base salary in the first half of 2021, but banks raised this to $100K in the second half of this year.
At the same time, this person became a Year 2 Analyst, which meant a new base salary of $105K.
But in January 2022, banks increased base salaries to $110K for Year 1 Analysts and $125K for Year 2 Analysts, so this person might now be on a $125K base salary.
So, what is his total compensation for “the past year”?
Is it $80K + $85K = $165K?
How about $80K + $85K * 0.5 + $100K * 0.5 = $172.5K?
Or is it $80K + $100K = $180K?
Or should we go with $80K + $110K = $190K?
I lean toward the first two numbers because, in all likelihood, banks will reduce bonuses due to these higher base salaries.
Here are the average percentage increases for total compensation over the past 1-2 years:
Analysts: 20-25%
Associates: 20-25%
VPs: 25-30%
Directors: 25-30%
MDs: N/A (too difficult to determine a single “average”)
At first glance, these seem like impressive increases.
But the true inflation rate is likely at 10-20%, and global investment banking fees were up by even higher percentages!
What Happened to Investment Banking Fees?
After an initial slowdown when the pandemic first struck in early 2020, banks have generated record-high fees from M&A and capital markets deals.
Here’s 2021 global investment banking revenue by region, with percentage increases over 2020 noted:
According to other sources, global fees were nearly $160 billion, up 22%, with revenue in areas like M&A jumping nearly 50%.
Unsurprisingly, super-loose monetary policy combined with widespread panic about the future led to a boom in deal activity.
And since everyone was working from home, senior bankers could pitch far more companies from the comfort of their small mansions, resulting in record-high paydays for MDs and terrible lifestyles for junior bankers.
At the same time, compensation rose in rival industries, such as tech, and working 80-90 hours per week for $150K in total compensation increasingly seemed like a bad deal.
But the cherry on top came from the infamous “105-hour workweek” leaked presentation from a group of Goldman Sachs Analysts.
Together, these factors forced the large banks to increase pay.
That move has generated a few questions:
Will these pay increases last?
Given these higher base salaries, what will be bonuses be like this year and beyond?
How does this higher compensation change the investment banking vs. private equity decision and the appeal of IB vs. other industries?
I’ll address these questions at the end, but I want to cover the main components of IB compensation and give some more commentary on the pay increases first:
Investment Banker Salary and Bonus Levels: The Main Components
For most bankers, there are five main components to “compensation”:
Base Salary: This is what you earn via paycheck or direct deposit every two weeks. Up until 2021, these numbers hadn’t changed much in years.
Stub Bonus: Since Analysts and Associates graduate from university or MBA programs and start working in the middle of the calendar year, they receive “stub bonuses” for their first ~6 months on the job. These are typically low percentages of Year 1 base salaries, such as ~20-30%, but they could be much higher at some firms (~50%).
End-of-Year Bonus: You earn this after your first full year of work. Initially, it’s 100% cash, but a percentage will shift to stock and deferred compensation as you move up. As a later Associate or VP, it might be around 20-30% stock/deferred with a 3-year vesting period.
Signing/Relocation Bonus: This one applies to Analysts and Associates who graduate and accept full-time offers. This signing bonus might be around $10-$15K at the Analyst level and $50-$60K as an Associate.
Benefits: Finally, you’ll get health insurance, vacation days, and potential participation in the firm’s profit-sharing or 401(k) retirement plans. These are useful in the U.S. but less so in civilized places with functional healthcare systems, such as Europe.
Investment Banker Salary and Bonus Levels: Analysts
Initially, banks moved Analysts from the $85K – $95K progression for base salaries up to $100K – $110K.
Meanwhile, some elite boutique banks, such as Centerview, went up to $130K for Year 1 Analysts (!).
Then, in January 2022, banks went to $110K and $125K base salaries for 1st and 2nd Year Analysts, making the initial increase seem like chump change.
Bonuses for 2021 spanned a wide range, going from $75K to $115K for Year 1 Analysts and $105K to $145K for Year 2 Analysts.
And some elite boutiques paid above these numbers, meaning that some 2nd Year Analysts could have earned closer to $300K, depending on the base salary number you select.
On the other end of the spectrum, some regional boutiques might still pay base salaries less than $100K along with substantially lower bonuses, which is why I set $150K as the bottom of this range.
At large banks this past year, bonuses seemed to be around 100% of the old $85K – $95K base salary numbers, with some variation above and below that depending on the firm size and type.
But with these higher base salaries, that percentage will almost certainly decrease, so total compensation will stay about the same.
Investment Banker Salary and Bonus Levels: Associates
Banks increased the base salary progression here from $150K – $200K up to $175K – $225K.
Again, there were exceptions in both directions, with some elite boutiques paying above that and regional boutiques probably paying below that.
It’s also worth noting that different banks paid very different bonuses at this level.
For example, Citi and Morgan Stanley paid conspicuously low bonuses, with some Year 1 Associates at $300K or less in total compensation (down to even ~$250K).
Meanwhile, Goldman Sachs paid quite well, with many Associates in the $400K – $500K total compensation range, and various other bulge bracket and middle market firms followed suit.
And there were even reports of a few Associates earning $600K or more in total compensation (!) at some smaller firms.
One final note: Even at the elite boutiques, banks are shifting percentages of the year-end bonus to stock and deferred compensation.
The percentages are still fairly low (10-30%), but that adds some risk with a multi-year vesting period.
Investment Banker Salary and Bonus Levels: Vice Presidents
There seemed to be a modest bump in base salaries here, but the percentage increase was lower than what Analysts and Associates received.
The main point is that bonuses increased substantially; in some cases, they now represent 150-200% of base salaries.
I have no real data on compensation at regional boutiques, but I would not be surprised if base salaries and bonuses have remained lower, which is why I’ve set $500K as the minimum in this range.
Investment Banker Salary and Bonus Levels: Directors
Once again, the news here was substantially higher bonuses combined with base salaries that stayed about the same or went up modestly.
However, the stock percentage and vesting period also tend to increase at this level.
Investment Banker Salary and Bonus Levels: Managing Directors
As usual, it’s hard to say anything definitive about “trends” in MD bonuses because bonuses at this level depend 100% on performance.
If you close no deals, your bonus could be $0, but if you’re on fire, you could earn in the low millions.
The average MD is probably earning between $1 and $3 million per year, with a significant percentage paid in stock and deferred compensation.
The “ceiling” could be a multiple of that number, but the average MD does not earn in that range.
Regional Differences and London Compensation
If you go by the 2020-2021 Arkesden reports, the old numbers in London were:
Analyst: £50K – £60K base salaries and total compensation of £80K – £120K.
Associate: £90K – £130K base salaries and total compensation of £150K – £240K.
VP: £140K – £170K base salaries and total compensation of £250K – £350K.
But banks increased base salaries once again here, so the new numbers seem to be something like:
Analyst: £60K – £90K base salaries (yes, I know Centerview pays more).
Associate: £100K – £140K base salaries.
VP: £150K – £180K base salaries.
Total compensation is probably £20K – £40K higher for Analysts and Associates and more like £50K+ higher for VPs.
At a 1.35x GBP:USD exchange rate, these figures are still much lower than U.S. compensation, but that has been the case for a long time.
You can blame Brexit, better lifestyle/hours, and pay in competitive industries in Europe being lower as well.
What Does All This Mean? Is Investment Banking Worth It?
I’ll now return to the three questions in the beginning:
Will these pay increases last?
Given these higher base salaries, what will bonuses be like this year and beyond?
How does this higher compensation change the investment banking vs. private equity decision and the appeal of IB vs. other industries?
To reiterate, the large banks were forced into paying higher base salaries due to high turnover, widespread job dissatisfaction, and rising prices and salaries elsewhere.
Without those factors, I’m sure they would have kept Analysts on $85K – $95K base salaries for as long as humanly possible.
In the future, banks in the U.S. will most likely do what European firms have already done and keep base salaries high(er) while reducing the bonus percentage, which keeps total compensation about the same.
Bonus numbers depend mostly on deal activity and fee volume for the year, and those vary substantially based on fiscal and monetary conditions.
We will probably see lower deal activity in the future, but I have no idea if this is one year away, 5-10 years away, or something in between.
Even if that happens, I think it will be difficult for banks to reduce base salaries, so they’ll likely cut bonuses to much lower percentages.
Regarding investment banking as a career vs. other options such as private equity, corporate development, or tech, the higher pay now makes IB more appealing on paper.
If you stay for the Analyst-to-Associate (A2A) promotion, you could easily earn more than you would in your first year of private equity.
Of course, the compensation ceiling at the top in PE, hedge funds, etc., is still higher, but you need to stay for 10+ years for that to be a factor.
If you’re in the “I want to stay in finance for ~5 years, earn a good amount, and then leave to do something fun/interesting” camp, moving into private equity may be less of a clear win now.
Finally, I wrote “on paper” above because working conditions and lifestyle also play a big role.
If your total compensation for the year increases by 15%, 20%, or even 30%, that might seem like a great result.
But if you’re working from a tiny apartment, you can’t go outside, you’re on call 24/7, and inflation is running at 10-20%, you’re probably not going to be satisfied.
That said, higher investment banker salaries and bonuses will satisfy new hires for a time.
But I doubt they’ll substantially reduce turnover or increase job satisfaction – especially now that “the spread” between different firms has become a gaping hole.