Wall Street bonuses tumble by 9 per cent

NEW YORK • Wall Street's average bonus fell 9 per cent to US$146,200 (S$202,500) last year, the biggest drop since 2011, according to estimates by New York state comptroller Thomas DiNapoli.

The bonus pool was US$25 billion, down 6 per cent from a year earlier, even as the industry added 4,500 jobs in New York City, Mr DiNapoli said on Monday.

The payouts shrank as profits from the broker-dealer operations of New York Stock Exchange member firms declined by US$1.7 billion to US$14.3 billion.

Profit at the six largest US banks rose to US$93 billion last year, more than double the 2009 level. Still, the industry has been slow to recover from the 2008 global financial crisis. A years-long slump in fixed-income trading revenue and rising litigation costs have forced many banks to cut jobs and pay. The 24-company KBW Bank Index fell 10 per cent to last Friday this year.

"Wall Street bonuses and profits fell in 2015, reflecting a challenging year in the financial markets," Mr DiNapoli said. "While the cost of legal settlements appears to be easing, ongoing weaknesses in the global economy and market volatility may dampen profits in 2016."

Smaller bonuses mean New York City will be forced to contend with lower tax revenue this year and next, said Ms Kathryn Wylde, chief executive officer of the Partnership for New York City.

She added that politicians calling for stricter regulations for Wall Street should recognise that the industry is responsible for about 40 per cent of the local economy and directly contributes almost 20 per cent of tax revenue.

"New York cannot thrive if Wall Street withers," she said.

Investment banks are also still dealing with the consequences of misconduct in the years before the financial crisis. A group of 15 global investment banks will probably see higher legal expenses over the next two years after already setting aside US$219 billion in costs between 2008 and 2014, according to a survey by Moody's Investors Service.

The state got more pessimistic about prospects for this year, saying the state-wide bonus pool will probably drop 2.5 per cent, down from a previous estimate for a 0.7 per cent increase.

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A version of this article appeared in the print edition of The Straits Times on March 09, 2016, with the headline 'Wall Street bonuses tumble by 9 per cent'. Print Edition | Subscribe