Wall Street Bonus Pool Jumped by 3% in 2014, DiNapoli Says

Wall Street’s bonus pool rose 3 percent to $28.5 billion in 2014, according to estimates by New York state Comptroller Thomas DiNapoli.

Employees took home an average bonus of $172,860 as the industry added 2,300 jobs in New York City, the first time it’s expanded since 2011, DiNapoli said Wednesday in a statement. The bonuses rose even as profits from broker-dealer operations of the New York Stock Exchange member firms fell 4.5 percent to $16 billion last year. It was the second straight annual decline as legal settlements tied to banks’ role in triggering the financial crisis depressed profits.

“The securities industry remains profitable and well-compensated even as it adjusts to regulatory changes,” DiNapoli said. “The resumption of job growth in the securities industry bodes well for New York’s economy, but it remains to be seen whether this trend will be sustained.”

Banks have cut costs and employees as revenue from investment banking and trading fell at the 10 largest firms in four of the past five years, according to data from Coalition Ltd. New capital rules that limit how much banks can fund operations with borrowed money and higher litigation costs have also contributed to lower profitability and pressure on pay.

Bank Settlements

JPMorgan Chase & Co., the largest U.S. bank, posted an 8 percent decline in trading revenue last year. Goldman Sachs Group Inc., which set a Wall Street trading record in 2009, had its lowest revenue from that business since 2005.

Bank of America and Goldman Sachs are among financial firms paying for legal settlements. In August, Charlotte, North Carolina-based Bank of America agreed to pay almost $16.7 billion to end federal and state probes into mortgage-bond sales.

The same month, New York-based Goldman Sachs agreed to pay $3.15 billion to repurchase residential mortgage-backed securities to resolve federal claims tied to the sale of the bonds to Fannie Mae and Freddie Mac.

While the settlements are undermining profits, they’ve been a boon to New York state, giving it a record $5 billion surplus for the fiscal year that ends March 31. The largest chunk comes from a $3.6 billion deal in June with BNP Paribas SA after the French bank admitted to evading U.S. sanctions against Sudan, Cuba and Iran.

City Impact

The bonuses estimated by DiNapoli fall within the range assumed by both the state and New York City budgets, the comptroller said. Though the number of jobs rose to 167,800, the industry is still 11 percent smaller than it was in 2007 before the financial crisis, he said. Each new securities job creates two additional ones in other industries, he said.

The comptroller’s analysis showed a trend in which the securities industry, while still crucial to the city and state economies, is dispersing. From 2007 to 2014, New York City’s share of U.S. jobs in the industry fell to 19 percent from 20.9 percent. Securities firms supplied 6.7 percent of city tax revenue last year, and 19 percent of state tax collections in its 2014 fiscal year.

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