Equities Trading Set to Spur Revenue & Bonuses in 2025 – Winners & Risks Revealed

The investment banking industry in 2025 is enjoying unexpectedly strong performance, especially in equity markets and trading operations. According to S&P Global’s Coalition Greenwich data, global investment bank revenues are projected to rise about 10% from 2024 to 2025—driven largely by a 15% increase in equities trading; advisory and origination businesses are also growing, but more modestly (~8%) [2]. This revenue uplift is being spurred by volatility in equity derivatives, surging prime brokerage balances, and strong client activity in cash equities [2][6].

Compensation consultants agree: bonus pools are expected to be substantially higher this year. Johnson Associates projects bonuses for equity sales & trading up 15-25%, advisory and equity underwriting up 10-15%, and fixed income and debt underwriting in the 5-15% range [1][3][4]. These represent among the largest increases in recent history, with bonus pools expected to be the highest since 2021 [3].

However, despite the strong topline, equity sales & trading teams may not see their compensation reflect their revenue contributions fully. The underlying bonus allocation process includes smoothing—cross-divisional transfers when one area overperforms—and burden sharing, particularly to preserve relationships and avoid damaging turnover in advisory lines after a weak bonus season [1]. Advisory bankers, buoyed by a steep 41% rise in global M&A volume year-to-date (especially in tech and North America), may have strong claims in compensation discussions [1].

Individual banks are concretely capitalizing on this trend. Morgan Stanley, for instance, generated $4.1 billion in equities trading revenue in Q3—up 35% year-on-year—overtaking Goldman Sachs ($3.7 billion) in that quarter, helped by record prime brokerage financing revenues and strong growth in derivatives [2][5]. This outperformance strengthens their leverage in compensation negotiations and talent retention.

Looking ahead, expectations for 2026 are more tempered. Coalition Greenwich forecasts a decline in equities trading revenues (~-6%) and modest growth in advisory / origination (~9%) [2]. Economic uncertainty, interest rate risk, and competition—including from electronic market makers—create tail risks. Banks may start pushing back on cost growth, and bonus growth could face constraints if any of those headwinds materialize.

Strategic implications:

• Banks need to balance reward for high-growth trading units with retention risks in advisory and underwriting; misallocation risks could trigger turnover in revenue-critical advisory teams.
• Talent competition—particularly from the buy-side and electronic trading firms—could force banks to front-load compensation or offer non-cash incentives.
• Risk management is crucial: high volatility drives profits but also potential losses; banks must ensure that incentives don’t encourage undue risk or short-termism.
• Investors should monitor banks’ compensation expense as a share of revenue; overgenerous smoothing or cross-subsidies may erode shareholder returns.