Wall Street Poised for Bonus Increases in ‘Year of the Bank’

0:00Scarlet Fu:Is your multi-entity management creating more confusion than clarity? You need the Intuit ERP. Intuit Enterprise Suite. It's the AI-native ERP solution that's powerful, painless, and proven. Learn more at intuit.com slash ERP. Everyone has been there. Your team's feedback is scattered across emails, chats, and sticky notes. It's a mess. But PDF Spaces and Adobe Acrobat gives you one collaborative workspace to streamline every file and comment. So, if you need six departments to finally agree on a proposal, do that with Acrobat. Need to turn a mountain of feedback into one plan of action? Do that with Acrobat.

0:39Scarlet Fu:Want to stop searching for files and finally get everyone on the same page? Do that. Do that. Do that with Acrobat. Learn more at adobe.com slash do that with Acrobat. If you follow markets, you know the value of long-term thinking. You plan. You diversify. You prepare for volatility. But in life, even the best strategies can't prevent every bad day. A fire, a loss, a disruption that demands immediate attention. When that happens, what matters isn't just what you planned, it's who shows up. That's where Cincinnati Insurance comes in. For more than 75 years, they've helped individuals and businesses navigate life's toughest moments with care, expertise, and personal attention.

1:23Scarlet Fu:Together with independent agents, Cincinnati Insurance focuses on relationships, not transactions. Their approach is grounded in experience, follow-through, and trust built over time. Bad days happen, and when they do, you deserve an insurance partner who understands risk, respects what you've built, and is ready to help you move forward. The Cincinnati Insurance Companies. Let them make your bad day better. Find an independent agent at CINFIN.com. Bloomberg Audio Studios Podcasts, radio, news You're listening to the Bloomberg Intelligence Podcast Catch us live weekdays at 10 a.m. Eastern On Apple CarPlay and Android Auto With the Bloomberg Business App Listen on demand wherever you get your podcasts Or watch us live on YouTube The most widely read stories on the Bloomberg Always about Wall Street bonuses Absolutely You need readership.

2:22Oh, my God, I need readership this month or this quarter or this year. Write a story on Wall Street bonuses.

2:28Scarlet Fu:Yeah. Well, we have one today. It's Wall Street poise for bonus increases in year of the bank. So you can bet a lot of people are clicking on that story. Catherine Doherty is the author of that story. She's our Bloomberg News finance reporter. Catherine, it is only May, but the folks you talk to say that there's been some banner deals in the first part of the year that has led them to conclude already that it's going to be a big, big year for bonuses. That's right. And we should caveat by saying it's still early in the year. So things could change. But right now the projections are looking pretty rosy.

3:00And that's because the long awaited comeback of deals, you've started to see that come through. We do have the big banks. They have just reported their first quarter. The second quarter looks to be pretty steady. So if the second half of the year takes a turn for the worse, that could change these projections. But right now it looks like the payout, especially for M &A advisory, equity underwriting, quite strong. And as we've been talking about the volumes that you've been seeing across equities and fixed income, as far as trading goes, those traders that are facilitating the buying and selling are also poised to see a pretty hefty payout if things continue as they've been going.

3:44Yeah. And we've just seen so much underwriting of public debt for the for the technology companies, IPO market kicking up. And then we're, I guess, still on the docket for some time, maybe towards the end of the second half of this year for some mega IPOs. Yes. SpaceX and so, I mean, you can certainly if you wanted to project out some pretty big fees for these guys. Yes. But that is also with the assumption that those IPOs come through. I think that that's if If all things continue in these deals actually see the light of day, then yes, these bankers who are facilitating them will see their pay bump increase.

4:24But if they don't, then we could see a reversal. Don't expect any huge declines. But in terms of the 10 to 20 percent plus year over year increase that is projected right now, that is considering that all of these things kind of fall into place in the way that everyone would hope. Because the way we used to do it when I worked on the street was you used around December, you'd have the really, really big discussion about how much bonus pool actually was going to be. And you use November actuals and December projected. And that's what you use to set up your bonus pool. You're accruing for it all year.

4:59But to say who gets what. So that's right. And there's a lot of months between now and December. Again, I've been sitting on the wrong side of the seat when my boss will come in and say, yeah, we had a great year, but we had a terrible month last month. So we're going to be cautious here.

5:11Scarlet Fu:Like what? There's always a reason for the managers to say that to come up with some angle. If you click on MA Go on the Bloomberg terminal, it gives you a snapshot of mergers and acquisitions and one point eight trillion dollars of announced deals so far this year. That's up almost 36 percent from the same time a year ago. So I'm guessing, Catherine, that in terms of bonuses, projected payouts, investment banking advisory is top of the list. Yes. I think that right now, and that's from a year ago, that is not the discussion that we would have been having. I think that, again, there were so many months and quarters that the narrative was the long-awaited comeback of deals.

5:52Now we're actually starting to see that come through. But it hasn't been quarter after quarter. this has only been really the end of last year and the beginning of this year that we have actually seen the numbers. And if the rest of the year falls into place, again, as projected, the pipeline is healthy, is what executives have been saying, then yes, we might see that these numbers do follow actually the numbers that you're pointing out on the terminal, which is the actual deal flow that the bankers are working on. And that's why and how they get paid. What's going on with headcount on Global Wall Street?

6:29Is this, you know, I'm thinking that AI could be a negative impact for headcount on Wall Street. What are we seeing so far? So executives were asked about this during first quarter earnings, and a lot of them echoed the same sentiment, which is that right now headcount is flat and AI is helping and making bankers more efficient. but right now it also, it hasn't led to that next step that everyone is expecting, which is headcount reduction. Um, a lot of the executives are saying yes, are, are, and it's not just their bankers just across the entire company, their executives are getting more efficient, but that's allowing them to work on more deals.

7:13It's allowing them to, uh, to increase revenue, but not hire as much as they might. So instead of cutting folks right now, I think the narrative is more talking about keeping things flat.

7:25Scarlet Fu:We look at the markets and record highs for the S &P 500, the Nasdaq, and we come back to this theme over and over again of there's so many headwinds, yet stocks just continue to move north. So far, the volatility that we've seen has not been negative for trading desks. During those earnings calls, did anyone talk about the turn in volatility, how it can go from good to bad quickly? Good to bad volatility is kind of what you need to narrow in on, right? Because at the end of the day, if you are on one of these bank trading desks and you're just facilitating and helping your clients reposition, volatility is a good thing.

8:01So up until now, it's been good volatility if we are distinguishing between good and bad. And it's the same for the market-making firms outside of the banks, they've really been setting, topping their own records year after year. And so I don't believe, and it really, if you go into different asset classes, equities has been kind of the strongest across the board, but fixed income follows close behind.

8:32Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. If your finance team spends more time finding data than using it, If there's one entity here and one here and one here and one here, if scaling your business feels like starting over, you need the Intuit ERP. Intuit Enterprise Suite is the AI-native ERP solution that's powerful, painless, and proven. Learn more at Intuit.com slash ERP. A business gift is never just a gift. It's a thank you, a milestone, a moment of appreciation. It's a message about how much someone matters and what your brand stands for. At 4imprint, you'll find thousands of customizable options, like premium apparel, branded drinkware, tech, totes, and more, each chosen not just for function, but for meaning.

9:20You can tailor every detail, your logo, your message, your presentation, so your gift feels personal and on-brand. And with expert support, dependable service, and thousands without a setup fee, creating something thoughtful doesn't mean making it complicated. Every order is backed by 4imprint's 360-degree guarantee, so you can be 4imprint certain it'll arrive exactly as expected, on time, and with the care your brand deserves. Because when the moment matters, the right gift speaks volumes, and the right partner makes it easy. Explore gifting with purpose and certainty at 4imprint.com. 4imprint.

9:554certain. The thing about AI for business,

9:58Scarlet Fu:it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

10:42You got some earnings coming out of some of the restaurants here. McDonald's, Shake Shack. I mean, my McDonald's orders have been the same since like 1978. It's a number two with a Coke. Quarter pounder with cheese and a Coke. I mean, it's been the same way since. You don't extra size it or anything? You know, if I have to do say anything other than number two with a Coke, then I'm inconvenienced, you know, and I've been doing that way since 1978, I think. So let's go to Mike Kalen. He knows what he's talking about here about these restaurants, senior restaurant and food service analysts. Hey, Mike, let's start with McDonald's.

11:13How are they doing with their business? Yeah. So, you know, what we wrote today was that they're trying to walk a tightrope right now. They're comping some very strong results, you know, over the last over a year ago, starting in 2Q. But they're trying to do that with value, which which risks a trade down from some of your consumers that are doing a little bit better. So, you know, sequentially, same star sales and growth rates are going to are going to decelerate starting in the second quarter. they become very aggressive on value and i think that's a big part of the reason why all of the restaurant stocks not all but most restaurant stocks are down and down significantly today they're being as aggressive as i've ever seen them on value they have a dollar fifty sausage mcmuffin right now at 250 mcdouble they have three dollar breakfast meals four dollar meals at other times of the day.

12:17This is as aggressive as I've ever seen them. I think that's much cheaper. And, you know, they're doing it, I think, for two reasons. Number one, they smell blood in the water. Jack in the box and Wendy's, you know, same store sales were down mid single digits last year. So those two chains who they, you know, obviously compete directly with are struggling mightily. And also who's got more and better data than they do. And they see that low income consumers are, which were really struggling last year, you know, could really feel it this year as inflation accelerates again.

12:53Scarlet Fu:So what I also noticed, Michael, is that McDonald's has a new lineup of specialty drinks. What are the financials behind the beverage category versus the food category? I'm guessing higher margins, perhaps bringing in lower demographics as a benefit? Yeah. So a part of this, you know, beverages is big and a big reason why it's big is that it's high margin. So, yeah, McDonald's is hoping to increase drink attachment rates to the orders or hoping to get some business in the afternoon. People looking for a pick me up. Right. They're going to do some Red Bull drinks in the second half. So that's also part of their strategy to try to lap very strong same store sales.

13:41I don't think it's a bad idea, but trying to lap very strong comps with value and low price items is just difficult to do. And I'm saying this about McDonald's and things are slowing there, but they're still best equipped to deal with a downturn in the consumer because they have more scale than anyone. and they can offer price points to, you know, like I've been mentioning, whereas their competitors just can't. Nobody buys, I would think, not too many entities out there buy more beef than McDonald's does. What do they say about the cost trends of beef and is there any relief in sight here? Yeah, Shake Shack and McDonald's both talked about it.

14:26Beef inflation is expected to moderate, right? It was, I think, mid-teens in the first quarter. And it's more impactful to Shake Shack's bottom line because they own a majority of their restaurants. But, yeah, it's expected to moderate throughout the year, maybe averaging high single-digit inflation for full year 2026. So still elevated, not as bad as we saw in the fourth quarter, which was high teens or mid-teens in the first quarter. It's going to moderate through year end and we should should settle out around high school digits.

14:59Scarlet Fu:How does Shake Shack counter rising beef costs? I mean, its entire business model is based on hamburgers. Does it just kind of lean more into chicken burgers and build out that that offering? Well, they're leaning into ribs. They have the first baby back rib sandwich they've had on the menu. You know, it's two ways. First of all, you know, I think there was some low hanging fruit in this in this company. You know, I don't think it was the most efficiently run business for for quite some time. And so management has done a good job over recent quarters being much more efficient with labor. So that's offset some of the costs.

15:39And then moving forward, it's going to be more about supply chain and productivity in the restaurants. Right. So, you know, those are going to be the two areas that they're looking. looking at, you know, but, you know, they're expecting some same-store sales growth and that's the best way to boost your margins, right? It's just driving more foot traffic through your store. So they're still confident that they can drive at least some restaurant margin expansion here in 2026. Stay with us. More from Bloomberg Intelligence coming up after this. A business gift is never just a gift. It's a thank you, a milestone, a moment of appreciation.

16:17It's a message about how much someone matters and what your brand stands for. At 4imprint, you'll find thousands of customizable options, like premium apparel, branded drinkware, tech, totes, and more, each chosen not just for function, but for meaning. You can tailor every detail, your logo, your message, your presentation, so your gift feels personal and on-brand. And with expert support, dependable service, and thousands without a setup fee, creating something thoughtful doesn't mean making it complicated. Every order is backed by 4imprint's 360-degree guarantee, so you can be 4imprint certain it'll arrive exactly as expected, on time, and with the care your brand deserves.

16:55Because when the moment matters, the right gift speaks volumes, and the right partner makes it easy. Explore gifting with purpose and certainty at 4imprint.com. 4imprint. 4certain. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth. On Public, you can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti.

17:31Retirement accounts? Yep. High-yield cash? Yes, again. They even have direct indexing. Public has modern design, powerful tools, and customer support that actually helps. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Add paid for by Public Holdings. Brokered services by Public Investing, member FINRA SIPC. Advisory services by Public Advisors, SEC Registered Advisor. Crypto services by ZeroHash. All investing involves risk of loss. See complete disclosures at public.com slash disclosures.

18:05Scarlet Fu:Small businesses are the pulse of every community. They bring people together, create opportunities, and drive growth. With a widespread presence in communities across the country, Chase for Business supports small business owners at a local level. That makes it possible for you to connect, learn from each other, and grow together. There's a real commitment to seeing small businesses succeed. The Chase for Business team has knowledge and expertise that span a wide range of financial areas. They can help you make more informed decisions as you navigate the complexities of running your business.

18:37Scarlet Fu:They'll help your business grow with individual guidance and convenient digital tools all in one place. With that guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more at chase.com slash business. Chase for business. Make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JPMorgan Chase Bank N.A., member FDIC. Copyright 2026, JPMorgan Chase and Company. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App.

19:17Scarlet Fu:Listen on demand wherever you get your podcasts or watch us live on YouTube. All right, we got some earnings out there and including some media companies, Warner Brothers Discovery, Peloton's out there, Geetha Ranganathan, she covers all the media stuff for Bloomberg Intelligence. She's not into this silly wellness stuff. She's a player. Warner Brothers Discovery, Geetha, they reported numbers. They're just about to get acquired by Paramount Skydance. What do we learn about Warner Brothers Discovery's business? Yeah, things are going along pretty nicely, Paul, for Warner Brothers Discovery. As expected, we did see plenty of weakness in the linear TV network division.

19:54Scarlet Fu:I mean, this was well telegraphed by the company. Part of this is, of course, just the structural weakness in TV advertising. But more importantly, and specifically for Warner, it was the lack of NBA. And so we saw TV advertising fall about 11 percent, but it's going to get far worse in the second quarter, where they've guided to about a 20 percent decline. But the other parts of the business, the parts of the business that investors are most excited about, and especially Paramount Skydance is most excited about, which is the studios and the streaming business, is actually doing really, really well.

20:26Scarlet Fu:So the good thing that we saw with streaming was that they added a lot of subscribers for HBO Max as part of their international expansion efforts. So they've expanded into a lot of European markets. And more importantly, it's not just subscriber growth. It's that they're tracking really well ahead of expectations in terms of profitability. So they already achieved fairly strong profitability last year with$1.3 billion for their streaming unit. Looks like they'll get maybe close to even$2 billion this year. You know, the estimates came up really nicely. And then Studio, again, doing pretty well as well.

21:02Scarlet Fu:Has there ever been any discussion at Warner Brothers about maybe creating tiers within HBO, you know, where you might have advertising and the shows might be broken up with commercials? So that is already there. We do have an ad tier for, you know, the HBO Max product. I mean, this was part of this whole wave of all of these different streaming platforms introducing ads started out with, you know, Netflix and Disney Plus and then Max. So it is slightly cheaper. But HBO shows like Broken Up, The Sopranos will be interrupted by commercials. Ah, yeah, yeah. Okay. They do license it out that way.

21:42Scarlet Fu:So I think, again, I'm not really sure what exactly the Warner Brothers team is going to do. I think at this point, Scarlett, it might be a little bit immaterial. I think the big focus right now is what Paramount is going to do with this asset, because they are pretty much on the verge of closing the deals, supposed to happen sometime in third quarter. And we're still unclear whether they're going to operate this as two separate platforms, Paramount Plus and HBO Max, or whether they're kind of going to consolidate it, what they're going to name the new product. All of that is still kind of a little bit unclear.

22:14Scarlet Fu:But the one thing that we are clear about is Paramount is acquiring a very strong asset and an asset that has really delivered a whole string of hits this year for HBO Max. And remember, the big thing coming a little bit later this year for HBO Max is the new Harry Potter series. So a lot of excitement, a lot of buzz around that. I never understood why they used the word Max in the app name. Like it just confused me. Because HBO was deemed by some people on the right as being too woke and too Hollywood-ish. So Max brought it back to Earth? Yes, that was the reason. Okay, but then it just confused everyone.

22:50Scarlet Fu:Exactly. It was a terrible decision. And HBO, the branding on its own is so powerful. In terms of content spend, Geetha, is that something that Paramount is going to stick to? I mean, HBO is known for being willing to spend on content. Is David Ellison willing to spend in the same way? He is absolutely willing to spend. So they have outlined$6 billion in synergies, Scarlett, but none of those cuts are going to come on the content spend side. So we're looking at a combined programming budget for both those companies at about$30,$32 billion. That is the highest in the industry. And remember, Paramount, even before they went and acquired Warner Brothers, really did a whole host of different content deals.

23:30Scarlet Fu:We had that really important deal with Duffer Brothers. We had the South Park streaming rights deal where they're paying something like$1.5 billion. We had the UFC deal, which was, you know, close to almost$8 billion over a period of seven years. So David Ellison is not holding back. He's made this commitment to have 30 film releases. That's basically doubling the output at both the studios starting next year. he's saying all the right things and doing all the right things as far as Hollywood is concerned right now from a content investment perspective. Geetha Karen from the Jersey Shore writes in, asks about Peloton.