NEW YORK (Reuters) - Despite the weak U.S. economy, this year could be the second most profitable for New York City’s securities industry, a report said, and the average bonus may top last year’s because so many bankers and brokers have been laid off.
Wall Street banks and brokerages earned $21.4 billion during the first three quarters of 2010, state Comptroller Tom DiNapoli said in a report on Wednesday.
That figure is far below the record $61.4 billion that banks earned in 2009 thanks federal government assistance, DiNapoli said. But 2010 profits are still set to the be the second highest on record.
Last year Wall Street paid out $20.3 billion in bonuses, DiNapoli said, but 2,700 securities and commodities employees got pink slips from September 2009 through last September, according to employment data.
The high-paying industry only employed 160,200 people in September, down from a peak of 200,300 in December 2000.
Bonus expectations for Wall Street firms are mixed this year, with some employees already bracing for a cutback.
Compensation consulting firm Johnson Associates has projected a small increase in incentive compensation across the financial services industry for 2010 — but founder Alan Johnson projects that big banks’ end-of-year bonuses could broadly fall by 5 to 10 percent from last year.
That forecast jibes with a separate report that City Comptroller John Liu issued on Wednesday.
“The astounding recovery of financial firm profitability in 2009 has been followed by a mixed year in 2010, yet total compensation in the industry is expected to be up modestly once year-end bonuses are paid,” Liu said.
Wall Street has the option of paying more of the traditional annual bonuses in stock instead of cash to help retain employees and dampen politicians’ ire at whopping payouts, which for stars can run in the millions of dollars.
With Congress poised to extend the Bush tax cuts, there also is less incentive for bankers and brokers to demand their bonuses this year instead of waiting until next year.
The post credit-crunch era of low interest rates has yet to end and this is another hazard for the city.
Liu noted that one of the city’s budget risks was his “belief that Wall Street cash bonuses will not return to the levels seen prior to the financial crisis and that interest income of high-net-worth taxpayers will remain relatively flat for an extended period.”
Investment banks Goldman Sachs Group Inc and Morgan Stanley had a slump in sales and trading revenue this year, a drop-off that also hit profits at JPMorgan Chase & Co, Bank of America Corp and Citigroup Inc.
Morgan Stanley has told executives to budget 10 percent to 25 percent less for bonuses this year, according to several media reports. Morgan Stanley would not comment on the reports.
New York City relies heavily on its wealthiest for personal income tax collections. Just 5,000 residents whose incomes topped $4 million a year paid nearly 39 percent of all of the city’s personal income tax collections in 2007, Mayor Michael Bloomberg said earlier this year.
Reporting by Joan Gralla; additional reporting by Maria Aspan; Editing by Kenneth Barry