Compensation consulting firm Johnson Associates is forecasting a less generous bonus season for Wall Street this year.
The firm said Tuesday that its third-quarter compensation analysis shows year-end incentives, which can be cash or equity awards, will drop an average of 20 percent to 30 percent compared with 2010.
That means most Wall Street professionals will receive smaller bonuses.
"This year started with great promise for a banner year on Wall Street, but hopes for larger bonuses faded over the summer and continue to dim as we approach year end," said Alan Johnson, managing director of Johnson Associates.
Bonuses last fell sharply in 2008, after the collapse of investment bank Lehman Brothers triggered the financial crisis. Incentives rebounded the past two years, however, as the market recovered.
But this year, the combination of the lack of an economic recovery, plus heightened regulation and uncertain markets has prompted most financial services firms to reduce the size of bonuses, Johnson said.
The firm anticipates fixed-income traders will see the biggest drop, with bonuses expected to fall up to 45 percent, while incentive pay for equities traders and senior management will drop up to 30 percent.
Johnson Associates also projects investment bankers' bonuses will tumble 20 percent, while incentive payouts elsewhere in the financial services industry will be flat.
For 2012, Johnson expects parts of the financial services sector will post a modest recovery. Assuming there isn't major economic weakness and a a large bank or nation doesn't collapse, investment and commercial bankers could see bonuses jump 15 percent or more next year, Johnson said.
He also anticipates financial services firms will continue to cut staff in the U.S., while adding employees in emerging markets.
The firm's analysis is based on monitoring the financial services industry, public data from eight of the nation's largest investment and commercial banks, and 10 of the largest asset management firms.