(Bloomberg) -- Bonus season on Wall Street is projected to be a tale of two cities, with bankers at regional US lenders hurt by smaller incentive pools while year-end compensation at larger firms is expected to rise by double digits. 

Bankers working for regional firms are likely to see their bonuses decline as much as 20% this year, while their counterparts at major global banks could see their incentive pay increase as much as 20%, according to a report Tuesday from compensation consultant Johnson Associates Inc.

“We have the have and have-nots — big banks are doing great, small banks are suffering,” Alan Johnson, managing director of Johnson Associates, said in an interview. That will impact how bankers are paid at year-end, when bonuses are calculated based on performance, he said. 

In the first quarter, banking giants including JPMorgan Chase & Co. and Citigroup Inc. reeled in windfalls from higher interest rates. Those benefits contrasted with the experience at regional banks that saw a flood of withdrawals and precipitous stock drops as shareholders worried that rising rates were eroding the value of the firms’ assets.

Last year, the average Wall Street bonus plunged 26% as a slump in dealmaking and banks’ efforts to contain costs weighed on compensation, according to an analysis by New York State Comptroller Thomas DiNapoli. That percentage brought the average bonus closer to what employees received before the Covid-19 pandemic, he said.

Bankers who advise on mergers and acquisitions also are likely to see their bonuses decline as much as 20% this year, while their counterparts in debt underwriting are poised to fare better, with their incentive pay increasing 5% to 10%, according to the Johnson Associates report. 

At the five biggest Wall Street firms, investment-banking revenue fell 23% in the first three months of the year. Inflation, fears of a recession and wild market swings kept dealmaking, including initial public offerings, mostly muted. The battle for talent has also slowed in the finance sector, with some firms trimming headcount and freezing hiring to manage expenses. 

“People are more cautious on hiring, and firms have cut back significantly, with headcount flat to trending down,” Johnson said. 

There are some signs of bright spots in the industry, especially for desks that continue to benefit from rising interest rates and the move away from equities to lower-risk assets such as bonds or money-market funds. Fixed-income traders could see their bonuses increase as much as 15%, outperforming their equity-trading peers as IPO activity remains muted, according to the report. 

Elsewhere in finance, incentive pay is likely to be flat or down. Those working in asset management may see a decline of 10% on lower profits, while bonuses at wealth-management firms are projected to be flat to up 5%, Johnson Associates said. Similarly, at private equity firms both big and small, incentive compensation is likely to be flat.

(Adds link to Morgan Stanley story after seventh paragraph. A previous version of this story corrected the first item in chart to “-15% to 20%.”)

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