Wall Street Bonuses Climb 8% to $20 Billion, DiNapoli Says
Wall Street’s cash bonus pool rose 8 percent to $20 billion in 2012 as profits surged, according to projections by New York state Comptroller Thomas DiNapoli.
Employees took home an average cash bonus of almost $121,900 last year, DiNapoli, a 59-year-old Democrat, said today in a conference call with reporters. The pool climbed as some firms moved up payments to 2012 to avoid paying higher federal personal income taxes taking effect this year and as profits in the securities industry increased three-fold, he said.
“Wall Street is still in transition, but it is slowly adjusting to changes in its economic and regulatory environment,” DiNapoli said. “Profits and bonuses rebounded in 2012, but the industry is still restructuring. Despite its smaller size, the securities industry is still a very important part of the New York City and New York state economies.”
Profits at New York Stock Exchange firms’ broker-dealer units, the traditional measure of profitability for the securities industry, were $23.9 billion in 2012, about three times more than the $7.7 billion earned in 2011, DiNapoli said. That made 2012 among the most profitable years on record.
JPMorgan Chase & Co. (JPM), the biggest U.S. bank, reported its third straight year of record profit for 2012, and Goldman Sachs Group Inc. (GS), the fifth-biggest U.S. bank by assets, said full- year net income rose 68 percent. Bank earnings have been buoyed by a surge in mortgage fees and gains in investments.
Jefferies Group Inc., the Wall Street investment bank that agreed to sell itself to Leucadia National Corp. (LUK), is paying year-end bonuses in immediately available cash, the firm’s executives said in a December memo to employees.
Global announced merger-and-acquisition volume reached its highest level in the fourth quarter since the third period in 2008, according to data compiled by Bloomberg. Revenue from trading and fixed income, commodities and currencies rose 21 percent, according to analytics firm Coalition Ltd.
“Cash is king right now,” said Jeanne Branthover, head of the financial-services practice at Boyden Global Executive Search Ltd., a New York-based recruiting firm. “Organizations are recognizing that cash is important to retain their talent.”
Still, the industry continues to cope with the fallout from the worst financial crisis since the Great Depression and new regulations that followed. As of December, employment totaled 169,700 jobs, 1,000 fewer than a year earlier, DiNapoli said. The securities industry in New York City has regained only 30 percent of the 28,300 jobs lost during the recession, he said.
As recently as October, DiNapoli predicted the 2012 bonus pool would drop. The last time the pool shrank for two consecutive years was in 2007 and 2008, at the beginning of the global financial crisis, according to the comptroller’s office. This year’s $20 billion pool is below the $34.3 billion peak reached in 2006.
Morgan Stanley, the investment bank cutting staff as its chief seeks to trim costs, is deferring bonuses for employees who have both total pay of more than $350,000 and incentive compensation of at least $50,000, a person briefed on the matter said in January. The previous year, most cash bonuses were capped at $125,000.
Barclays Plc (BARC), the second-largest U.K. lender by assets, said in February that it cut its bonus pool, and UBS AG (UBSN), Switzerland’s biggest bank is paying part of some workers’ bonuses in bonds that can be wiped out.
In fiscal 2008, Wall Street accounted for more than 20 percent of New York state’s tax revenue and 12 percent of New York City’s. By fiscal 2011, those percentages had dropped to 14 percent and 7 percent, respectively, DiNapoli has said.
DiNapoli’s bonus estimates don’t include stock options or other deferred pay.