Bloomberg News

Wall Street Bonuses Grew 15% in New York, DiNapoli Says

March 12, 2014

Wall Street Bonus Pool Grew by 15% Last Year, DiNapoli Says

A smoke break in New York's financial district on Wall Street. Photographer: Jeff Hutchens/Getty Images

Wall Street’s bonus pool rose 15 percent to $26.7 billion in 2013, fueled by compensation deferred from prior years, according to estimates by New York state Comptroller Thomas DiNapoli.

Employees took home an average bonus of $164,530 last year, the most since the 2008 financial crisis and the third highest on record, DiNapoli said in a statement today. The bonuses rose even as profits from broker-dealer operations of New York Stock Exchange member firms fell 30 percent to $16.7 billion in 2013.

Shares of Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley each rose more than 95 percent over the past two years, making equity awards worth more than when they were granted in previous years. During the same period, the bonus pool has grown by 44 percent, driven by deferred compensation, DiNapoli said.

“The industry still had a good year in 2013 despite costly legal settlements and higher interest rates,” said DiNapoli, a 60-year-old Democrat. “Wall Street continues to demonstrate resilience as it evolves in a changing regulatory environment.”

Legal Costs

While profit at JPMorgan Chase & Co. (JPM:US), the largest U.S. bank, declined as it announced more than $23 billion in legal and regulatory settlements, the bank said it wouldn’t hold those costs against employees when deciding pay because the behavior under scrutiny often happened in previous years.

Trading and investment-banking revenue at the nine biggest global firms fell 4 percent to $160 billion in 2013, as a drop in fixed-income revenue outweighed gains in equity trading and fees from advising and underwriting.

The largest Wall Street investment banks each set aside a smaller portion of revenue for employee pay to cut costs and improve returns. Shares of the three firms each jumped last year as an improving U.S. economy sent the Standard & Poor’s 500 Index (SPX) to a record high.

Morgan Stanley reduced the portion of pay that it deferred to later years for top earners. The bank, which set aside 100 percent of 2012 bonuses for employees who had both total pay of at least $350,000 and incentive pay of $50,000, this year deferred 50 percent to 98 percent of those workers’ bonuses.

Asset and wealth managers saw the biggest increases in bonuses at major financial firms, with a 10 percent to 15 percent jump on average, compensation consultant Johnson Associates Inc. said in a report this month. Equity traders’ incentives rose 5 percent to 20 percent, while fixed-income employees saw a drop of 5 percent to 15 percent, according to Johnson Associates.

Government Shutdown

An impasse over spending in Washington in October that led to a federal government shutdown and legal expenses -- including JPMorgan’s $13 billion settlement to end federal probes of its mortgage-bond sales -- helped drive down earnings, DiNapoli said.

A blow to Wall Street’s take could have hurt the bottom line for the state and New York City. In fiscal 2013, taxes on the securities industry and its workers delivered $10.3 billion to state coffers, or almost 16 percent of all revenue, DiNapoli said in an October report.

In New York City, Wall Street accounted for 8.5 percent of all receipts in fiscal 2013. The city’s tax revenue could be $100 million higher than projected this year because its budget assumed a 5 percent drop in the bonus pool.

The securities industry employed 165,200 workers in the city in December, 12.6 percent fewer than before the financial crisis, though employment levels have stabilized, DiNapoli said.

To contact the reporters on this story: Freeman Klopott in Albany at fklopott@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net; Peter Eichenbaum at peichenbaum@bloomberg.net Mark Schoifet, Stacie Sherman


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