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Wall St. profits, jobs continue to fall

By
Richard Morgan
Published Oct. 7, 2014, 12:07 p.m. ET

Wall Street profitability fell 13 percent in the first half of the year — but survivors in the still-shrinking securities industry may nonetheless see larger bonuses.

One factor is headcount reduction. Wall Street lost 2,600 jobs in the past year, which means fewer but potentially larger handouts from the bonus pool, New York’s state comptroller reported Tuesday.

The cumulative effect of deferred compensation is also playing a role. Post-crisis compensation practices have been spreading Wall Street bonuses out over several years in an effort to curb excessive risk-taking, according to the analysis by Comptroller Thomas DiNapoli.

The report suggests these deferred payments could propel bonuses higher for a third straight year.

DiNapoli’s office estimated in March that bonuses in the securities industry rose 15 percent in 2013 to an average of $164,530 — the highest since the 2008 financial crisis and the third-largest on record. And that was in a year when industry profitability fell 30 percent, to $16.7 billion.

Much of the decline in 2013 was attributed to legal and regulatory woes. DiNapoli reports that, since the start of 2009, the country’s six largest banks have agreed to pay $131 billion to settle legal actions related to the financial crisis.

Recent settlements by Bank of America and Goldman Sachs are crimping this year’s profitability, too.

“These expenses are likely to continue to constrain profitability in the second half of 2014 and, as a result, profits for all of 2014 may not exceed last year’s level,” according to the report.

Wall Street salaries, meanwhile, have held relatively stable over the past three years to average $355,500, including bonuses, in 2013.

That was five times higher than the $69,700 average recorded for the rest of New York City’s private sector — an income discrepancy underscoring Wall Street’s importance to the local economy.

The $58 billion paid to financial workers last year accounted for 20.9 percent of all private-sector wages, whereas those employees represented less than 5 percent of the city’s private-sector work force, DiNapoli noted.

The number of those employees totaled 162,400 in August, which means headcount in the city’s securities sector is now 15 percent lower than it was before the financial crisis.

And Wall Street has yet to contribute to city job growt h — as it did in earlier recessions — during the recovery. The industry has fared better elsewhere in the nation, where nearly half of all positions lost during the recession have been regained.

Even after the job losses, DiNapoli says, New York State employs many more securities workers than any other state and twice the number of second-place California.