The average Wall Street bonus fell 26% last year, the biggest percentage drop since the financial crisis, as a slump in dealmaking cut into bankers’ compensation.
Financial employees received average bonus cheques of $176,000 last year, compared with a record high $240,000 a year earlier, the New York state comptroller’s office said in a report on 30 March. The annual report measures bonuses paid to employees in New York’s securities industry and doesn’t include base salaries, stock options or other forms of deferred compensation.
Bonuses are a large part of a banker’s annual compensation. Firms usually grow their bonus pools throughout the year as they bring in revenue. Bankers are typically notified in late January about how much money they will receive.
The smaller cheques weren’t a surprise for many workers. Big Wall Street banks had cut 2022 bonus pools by as much as 40% as revenue tanked, The Wall Street Journal reported in December. Firms saw more than $50bn in revenue wiped out last year from 2021, according to data from Dealogic, as they brought in fewer deal-advising fees, stock offerings and bond sales. That was the biggest year-over-year decline on record.
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Last year’s bonus pool was $33.7bn, down from $42.7bn the previous year, according to the comptroller’s office. As a result, the average Wall Street bonus fell by the highest percentage since 2008, the year the financial crisis ravaged markets and sent the economy tumbling into a deep recession.
Executives had warned bankers that 2021 was a blockbuster year and they shouldn’t get used to it. Firms brought in higher profits that year as more companies struck deals or went public.
“Let’s just spell it out here: ‘This is going to be a more difficult compensation season at Jefferies, just like it will be for every firm in our industry,’” leaders of the bank Jefferies told staff in a December memo.
Banks have been cutting jobs in recent months after years of hiring during the pandemic. Companies like Morgan Stanley and Goldman Sachs have laid off thousands of employees to offset a drop in dealmaking revenue.
More bankers were expected to get no bonus for 2022, which banks often use as a way to communicate that the employees are underperforming and could be let go.
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The 2022 bonus cuts don’t just affect the bankers, who may have less money to spend at local coffee shops or lunch spots. The comptroller’s office said the smaller banker bonuses could pose a hit to the New York economy.
The office projected the state would take in $457m less in income tax revenue compared with 2021 because of the bonus cuts. New York City was expected to bring in $208m less in income tax revenue.
About one in 11 New York City jobs are associated with the securities industry, the comptroller’s office said.
“While lower bonuses affect income tax revenues for the state and city, our economic recovery does not depend solely on Wall Street,” said the state comptroller, Thomas DiNapoli, a Democrat.
DiNapoli’s office said the city and state had anticipated these revenue losses and already adjusted budgets accordingly.
Write to Alyssa Lukpat at alyssa.lukpat@wsj.com
This article was published by The Wall Street Journal, part of Dow Jones
