Securities industry workers who work on Wall Street can expect their financial bonuses for 2011 to shrink by 14 percent from the previous year, according to a new report by New York state comptroller Thomas DiNapoli.
"Cash bonuses were down in 2011, reflecting a difficult year on Wall Street," he said on Wednesday in a statement. "Profits were down sharply, and securities firms in New York City resumed downsizing in the second half of the year. The securities industry, which is a critical component of the economies of New York City and New York state, faces continued challenges as it works through the fallout from the financial crisis and adjusts to regulatory reforms."
The decline in bonuses reflects Wall Street firms' sharply reduced earnings last year. Total profits for these companies fell 51 percent, the second consecutive year that earnings fell by more than half. DiNapoli estimated that securities firms made a combined $13.5 billion in 2011, down from $27.6 billion in 2010.
Although Goldman Sachs (GS), Morgan Stanley (MS), and other large New York banks have taken steps to limit cash bonuses, personal income tax receipts in New York suggest that overall awards for bankers, traders, and other industry professionals may have declined less than the 2011 estimates indicate. That is is likely because firms also paid out bonuses that had been deferred from previous years, according to the report.
Other findings from the comptroller's office, which every year estimates bonuses paid to securities industry workers in New York City (see bottom for a chart showing changes in Wall Street bonuses since 1985):
-- The securities industry in New York City has resumed downsizing. Between April 2011 and December 2011, the industry shed 4,300 jobs. During the financial crisis, the industry had lost 28,000 jobs, of which only 9,600 jobs had been recovered before losses resumed in April 2011.
-- The average cash bonus declined by 13 percent to $121,150 in 2011. The average bonus declined slightly less than the total cash bonus pool because the pool was shared among fewer workers than in 2010.
-- The average salary (including cash bonuses) in the securities industry in New York City grew by 16 percent to $361,180 in 2010, which was 5.5 times higher than the average salary in the rest of the private sector ($66,110).
-- The member firms of the New York Stock Exchange devoted nearly 52 percent of their net revenue to compensation (e.g., salary and bonuses for their broker/dealer operations) during the first three quarters of 2011, compared with 47 percent in all of 2010 and 36 percent in 2009.
-- In 2010, the securities industry in New York City accounted for 23.5 percent of all wages paid in the private sector despite accounting for only 5.3 percent of all private sector jobs.