As the artificial intelligence (AI) surge transforms various sectors, Wall Street’s bankers are reaping significant rewards in terms of compensation hikes.
According to Alan Johnson, managing director of Johnson Associates, “The big banks had a very good 2025 and are likely to perform equally well, if not better, this year, leading to substantial pay increases.” In fact, he believes these banks are poised to be compensation leaders for the first time in a decade.
Projections indicate that nearly half of Wall Street employees can expect salary increases in 2026. Key sectors such as initial public offerings (IPOs) and mergers and acquisitions (M&A) are set to witness the largest increases, with estimates suggesting up to a 20% rise compared to last year. Equity traders, who enjoyed the highest salary growth last year, are predicted to see an average pay increase of 12.5%. Meanwhile, bankers involved in this year’s substantial bond issuance are expected to see a 7.5% salary growth, and those in commercial and retail banking should see a 5% rise.
However, the outlook is less optimistic for workers in alternative investments. Large private equity firms anticipate a modest pay increase of only 2.5%, while midsize and smaller private equity firms, venture capitalists, and real estate asset managers are not projected to receive any raises collectively. Additionally, private credit workers may face an average bonus decline of 5%, following increases of 6% in 2025 and 10% in 2024.
Johnson points out that banks have made a significant recovery in compensation over recent years, while the allure of private equity has diminished. This is partly due to increased uncertainty in private markets, driven by retail investor outflows from various private credit funds, which have adversely impacted returns. The private equity sector is grappling with a large backlog of portfolio companies and is under pressure to sell to provide returns for investors.
This downturn is compounded by perceived risks associated with their investments in the software industry, which has faced scrutiny as AI developers release advanced tools aimed at specific business challenges. Despite these challenges, major firms like Apollo Global Management, Blackstone, Blue Owl Capital, and KKR are actively diversifying their revenue streams, including investments in AI infrastructure, although their stocks have struggled in comparison to major bank indexes.
On a broader scale, the evolving landscape of AI and geopolitics has not dampened the ongoing dealmaking environment spurred by regulatory easing under the previous administration. Anticipated IPOs this year include notable names like OpenAI and Anthropic, signalling continued activity in the market.
Looking ahead, experts suggest that AI will redefine salary structures and talent dynamics in the finance sector as automation increasingly takes over tasks traditionally performed by junior analysts. Johnson notes, “In the long term, there may be fewer professionals in finance; however, those remaining will likely possess more diversified skills and command higher salaries.” He adds that those who successfully navigate the challenges posed by AI may find even better career opportunities.
In summary, while Wall Street bankers are poised for substantial compensation increases amidst an AI-driven rebound, alternative investment sectors face challenges that could limit pay growth. The future workforce in finance is likely to evolve with critical skills shaped by technology, promising enhanced opportunities for those who adapt.
