Wall Street bonuses set to rise after '11 declines

• Overall, Wall Street bonuses expected to be flat, up 5% to 10%
• Bond traders will reap the biggest incentives as investor demand for less risk skyrockets
• Investment bankers, stock traders could see bonuses fall; uncertainty has hampered deal making, demand for stocks

NEW YORK -- Wall Street workers, whose bonuses and year-end incentives fell by as much as 30% last year, will see slightly bigger bonuses and stock awards in 2012.

Year-end incentive pay, which includes cash bonuses as well as company stock, will be flat to moderately larger compared to what happened in 2011, according to an annual compensation analysis by Johnson Associates.

Overall, incentive pay for Wall Street pros will be flat to moderately higher -- up 5% to 10% over last year.

The big winners will be bond traders, which will see year-end incentives jump 10% to 20%. This group saw the biggest cuts to their bonus pay in 2011. The bigger paycheck this year is due in large part to investors' massive demand for Treasury bonds and other fixed-income securities in an uncertain economic environment.

Losers include investment bankers and stock traders, which are expected to see year-end bonuses either flat or actual decline 10% or more. The less-than-stellar bonuses for this group is due largely to uncertainty about the outcome of the presidential election and the nation's fiscal situation, including tax policy. Investors trade less and buy fewer stocks while companies tend to delay deal making when uncertainty dominates.

"The recovery in financial services continues to be a struggle, and while incentives will be modestly up, few professionals will have reason to cheer," says Alan Johnson, managing director of Johnson Associates. "The bonus season will be rightfully subdued."

But given that bonuses were slashed by as much as 30% in 2011, even flat to slightly higher bonuses "is notable" because it signals an ongoing recovery of financial markets, Johnson adds.

And the outlook for 2013? Incentive pay gains in the 5% to 15% can't be ruled out, the report says. Yet the recovering markets don't guarantee job growth on Wall Street next year. As in many other industries, the cost of new regulations and an ongoing effort to boost profits are resulting in layoffs in the U.S. One bright spot: jobs are being added overseas for traders and bankers in rapidly growing emerging markets, the report adds.