It’s the Most Wonderful Time of the Year: Bonus season. Finance professionals put their nose to the grindstone all year hoping for a hefty year-end bonus. For many with a career in finance, the bonus is a significant part, if not a majority, of their total compensation. When the industry is doing well, it can be a very happy time of year for employees. But after a poor year, bonuses shrink or disappear completely.

Even with bonuses, there may be disappointment. For one, bonuses are taxed more due to their classification as “supplemental income” by the Internal Revenue Service. When you actually get that big check be prepared that it could be almost cut in half from your promised amount due to withholding. Of the remaining amount, only about 75% is immediately available since a quarter of the bonus typically comes in deferred cash payments and restricted stock that may not be accessible for some time. This can be quite deflating given the grueling hours many junior bankers put in, so a disappointing bonus feels even worse if you think of it on a per hour basis. Most junior bankers put in over 60 hours a week. But have some perspective-the average bonus for New York professionals in the securities industry is still very high (it was $172,860 in 2014).1

Financial industry bonuses for 2015 are expected to drop about 10% from 2014 levels, making 2015 the first down year since 2011, according to compensation firm Johnson Associates.2 Traders are expected to see the biggest hit to their bonuses. Regulations coming from Dodd-Frank have severely hampered the amount of risk traders can take and trading volumes are down across the board. This is especially true in fixed income where the prospects of rising rates and illiquid markets keep many investors sitting on their hands. Since market-makers are the ‘other side of the trade’, skittish investors mean less order flow and fewer profits for trading desks. Add in the pain felt from the commodity collapse and emerging market woes and it’s hard to find many areas that were profitable.

Asset management is also expecting weaker bonuses in 2015 (reportedly down 5%), thanks to a flat equity market and lower fixed income markets. Commercial banking compensation continues to erode- they are down 30% from 2009 levels.3 In October, JP Morgan announced it had allocated 13% less for year-end bonuses than 2014. European banks are reportedly faring worse. Deutsche Bank is planning extensive layoffs and many Eurozone economies are on the brink of recession.

But it’s not all bad-a few areas in finance are bucking the trend and doing quite well. Mergers and Acquisitions (M&A) bankers are expecting windfall bonuses as 2015 turned out to be a “golden age of M&A” according to Hernan Cristerna, JP Morgan’s co-head of global M&A. Shareholders support M&A transaction as a way to ‘buy’ growth and the low interest rate environment create the low borrowing costs to make many deals possible.

Total worldwide M&A deals saw record deal amounts in 2015 to over $4.1 trillion, surpassing the prior record of $3.9 trillion in 2007, according to Dealogic. Deal volume was heaviest in health care and technology, culminating in the proposed $160 billion healthcare merger ever between Pfizer and Allergan, the largest ever. According to compensation consultants, M&A banker’s 2015 total compensation is expected to increase a whopping 50% from 2014 levels.4 Some bankers even saw a return to the million dollar bonus level. Managing directors in M&A bankers could enjoy bonuses of up to $1.1 million in 2015, up from $600,000 in 2014. Some junior level bankers (analysts and associates) at top firms enjoy bonuses between $100,000 and $150,000.5 Analysts are the most junior bankers while associates, typically professionals with a graduate degree such as an MBA or a Master’s in Finance, are one level higher in most org charts.

Private equity firms were another bright spot for bonuses in 2015 and almost half surveyed by Preqin reporting an increase in bonuses from 2014.6 The best performing private equity firms were real estate, buyouts and venture capital, no surprise given the monumental valuations for private companies such as Uber, Airbnb and Snapchat.

Buyback desks, typically part of the investment bank, have seen plenty of volume as buyback totals reached a new record in 2015. Buybacks or share repurchases are purchases of outstanding stock by the company themselves. Companies employ the services of professional banks for their expertise in accumulating large blocks of stock, often discreetly. And of course, there is a commission tacked onto these repurchases. We saw a slew of corporate bond offerings in 2015 racing against the prospect of rising interest rates by the Federal Reserve. Corporate America borrowed billions from yield-starved investors and often used the proceeds to repurchase stock. This also boosts the key Earnings per Share, EPS, metric since the outstanding share count is reduced. Many corporate executives use EPS as a gauge in determining their own bonuses.

Banker bonuses are not without criticism-many blame the bonus structure as root causes of the financial crisis. They contest that massive bonus payouts incentivize irresponsible behavior including exotic product underwritings, excessive leverage and financial engineering. Some argue that shareholders don’t have enough control over the rogue operations of some employees in the bank and their equity stakes are at risk. Nobody seems to mind, when the risks are producing profits. The repercussions of the risky behavior may not be felt for years and affect shareholders and taxpayers, long after the bonuses of the offenders have been spent.

Consequently, the European Union regulators placed curbs and even bans on some banker bonuses. But it gets tricky deciding which bankers would be covered under the ban. In the U.S., the Glass-Steagall Act had long separated a bank’s capital between depositors and proprietary (the banks own capital plus investors). With its quasi-repeal in the late 1990’s, bank deposits became at risk when the firm’s proprietary risks got too high. The financial crisis saw banks get taken over by the Federal Deposit Insurance Corporation, FDIC. Many more may have joined them without TARP, the Troubled Asset Relief Program in 2008. As a result of these unpopular bailouts, many major U.S. banks were supposed to become bank holding companies. Things were going to change and bonuses were going to be capped-but that never really seemed to take hold. For now, many finance professionals are simply enjoying the holiday season, some more than others, as we usher in a new year and await the 2016 bonuses!