Wall Street bankers’ av­er­age bonus falls by most since 2011

The Pak Banker - - COMPANIES/BOSS -

Wall Street bankers av­er­age bonus fell 9 per­cent to $146,200 in 2015, the big­gest drop since 2011, ac­cord­ing to es­ti­mates by New York State Comptroller Thomas DiNapoli.

The bonus pool was $25 bil­lion, down 6 per­cent from a year ear­lier, even as the in­dus­try added 4,500 jobs in New York City, DiNapoli said Mon­day in a state­ment. The pay­outs shrank as prof­its from the bro­ker-dealer op­er­a­tions of New York Stock Ex­change mem­ber firms de­clined $1.7 bil­lion to $14.3 bil­lion.

Profit at the six largest U.S. banks rose to $93 bil­lion in 2015, more than dou­ble the 2009 level and a 36 per­cent in­crease from a year ear­lier. Still, the in­dus­try has been slow to re­cover from the 2008 global fi­nan­cial cri­sis. A years­long slump in fixed-in­come trad­ing rev­enue and ris­ing lit­i­ga­tion costs have forced many banks to cut jobs and re­duce pay. The 24-com­pany KBW Bank In­dex de­clined 10 per­cent this year through Fri­day.

"Wall Street bonuses and prof­its fell in 2015, re­flect­ing a chal­leng­ing year in the fi­nan­cial mar­kets," DiNapoli said in the state­ment. "While the cost of le­gal set­tle­ments ap­pears to be eas­ing, on­go­ing weak­nesses in the global econ­omy and mar­ket volatil­ity may dampen prof­its in 2016."

Gold­man Sachs Group Inc. plans to elim­i­nate more than 5 per­cent of traders and sales­peo­ple in its fixed-in­come busi­ness, a per­son fa­mil­iar with the mat­ter told Bloomberg last week. Bank of Amer­ica Corp., which cut more than 10,000 jobs last year, will dis­miss about 150 trad­ing and in­vest­ment-bank­ing em­ploy­ees this week as part of the firm's pe­ri­odic cull of low per­form­ers, peo­ple fa­mil­iar with the mat­ter said last week.

Smaller bonuses mean New York City will be forced to con­tend with lower tax rev­enue this year and next, Kathryn Wylde, chief ex­ec­u­tive of­fi­cer of the Part­ner­ship for New York City, said in an e-mailed state­ment.

Politi­cians call­ing for stricter reg­u­la­tions for Wall Street should rec­og­nize that the in­dus­try is re­spon­si­ble for about 40 per­cent of the lo­cal econ­omy and di­rectly con­trib­utes al­most 20 per­cent of tax rev­enue.

"New York can­not con­tinue to thrive if Wall Street with­ers," Wylde said in the state­ment. In­vest­ment banks are also still deal­ing with the con­se­quences of mis­con­duct in the years lead­ing up to the fi­nan­cial cri­sis. A group of 15 global in­vest­ment banks will prob­a­bly see higher le­gal ex­penses over the next two years af­ter al­ready set­ting aside a to­tal of $219 bil­lion in costs be­tween 2008 and 2014, ac­cord­ing to a sur­vey by Moody's In­vestors Ser­vice.

Wells Fargo & Co. agreed last month to pay $1.2 bil­lion to re­solve claims re­lated to its Fed­eral Hous­ing Ad­min­is­tra­tion mort­gage prac­tices. Gold­man Sachs in Jan­uary agreed to set­tle a U.S. probe into its han­dling of mort­gage-backed se­cu­ri­ties for about $5.1 bil­lion, cut­ting fourth-quar­ter profit by roughly $1.5 bil­lion and clos­ing out a year of record le­gal and lit­i­ga­tion costs.

The av­er­age salary in the se­cu­ri­ties in­dus­try in New York City rose 14 per­cent to a record $404,800 in 2014, the lat­est year data were avail­able. The in­dus­try ac­counts for 22 per­cent of all pri­vate sec­tor wages paid in New York City and roughly one in nine jobs are di­rectly or in­di­rectly as­so­ci­ated with it, ac­cord­ing to the state­ment from DiNapoli's of­fice.

The state got more pes­simistic about prospects for 2016, say­ing the statewide bonus pool will prob­a­bly drop 2.5 per­cent in the cur­rent fis­cal year, down from a pre­vi­ous es­ti­mate for a 0.7 per­cent in­crease.

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