With Wall Street profits taking a hit again last year, one area that let its players feel a little less affected and breathe a sigh of relief was in bonuses. Things weren’t as bad as expected for the usual hefty payouts.
According to The New York Times, in a report released on Wednesday by New York state comptroller Thomas P. DiNapoli, the state’s financial workers’ bonuses are estimated to decline 14 percent during this season. But the numbers weren’t so rosy for banks.
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Their profits dove 51 percent in 2011 thanks to increased regulatory requirements, the European debt crisis and a slow U.S. economy. As compared to 2010, Goldman Sachs saw its profit tank 67 percent while the Bank of America reported an earnings decline of greater than 50 percent.
In a statement by Napoli, he said, “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.”
Taking a look at New York securities firms in 2011, they incurred an estimated $13.5 billion in profits, dramatically dropping from 2010’s $27.6 billion, according to DiNapoli’s estimates. This also represented the second year in a row that Wall Street saw profits drop by more than 50 percent.
But this didn’t translate to bonus cuts from Wall Street firms. They paid an estimated end of year $20 billion cash bonuses to workers. On average, an employee saw a $121,150 bonus, a 13 percent decrease from 2010 while staffing numbers continued dropping. These estimates do not include noncash compensation, reported The New York Times.
How does this compare to the pre-financial implosion days? Back in 2006, an investment bank employee took home an average bonus of $191,360.
One trend for bank bonuses has been annual payouts made in shares, which can be tied to the pay of worker’s longer-term job performance. Morgan Stanley placed a $125,000 ceiling on cash bonuses for 2011, which for some U.S. workers is a salary they could only dream about. But for investment traders and bankers it’s perceived as an insult after once seeing seven-figure bonuses.
Some top executives at the investment bank, such as its chief executive James P. Gorman, did not take their cash allocations from the bonuses.
Don’t feel too bad for the workers on The Street; their pay is still high as compared to other New York workers. For 2010, the average pay with for securities workers in New York City was $361,180. The numbers for 2011 aren’t available yet.
When broken down by paycheck, Wall Street came in 5.5 times greater as compared to other workers in the private sector.
These high compensation numbers challenge Wall Street firms as Washington and other critics believe they are too high but industry players support this, citing the importance of compensation to workers and for companies to keep talent.
Jamie Dimon, chief executive of JPMorgan Chase, said on Tuesday at an investor conference that during tough times, “We are going to pay competitively. We need top talent. You cannot run these businesses with second-rate talent.”