What bonus cuts? Wall Street handed out an average cash bonus of nearly $122,000 for 2012, up 9% from the previous year, according to a new estimate from the New York State Comptroller.
On the surface, the report appears to make New York banks look like hypocrites. All the talk of limiting excess, holding capital and deferring pay, and here banks are handing out large cash bonuses. Looking deeper though, banks did most all the things they promised. They just made a lot more money in 2012, and did it with a smaller workforce.
The cash bonus pool rose 8% in 2012 to $20 billion, according to the report. The average bonus rose more than the overall pool because New York employed 1,000 fewer people in December of 2012 than it did in the previous year’s final month.
More importantly, Wall Street banks were three times more profitable in 2012 than they were the year before. New York’s securities industry booked $23.9 billion in profit in 2012, up from the $7.7 billion earned in 2011, marking the third most profitable year since 1995, according to the comptroller’s estimates.
The average cash bonus in 2010, when New York banks were almost equally as profitable, was nearly $139,000, or $17,000 greater than the average bonus in 2012.
Goldman Sachs provides a good example. The average Goldman employee took home $399,506 in total compensation for 2012, up from $367,057 in 2011 – a nice increase. Some mid-level staffers at the firm received as much as 80% of their bonuses in cash, the high-water mark for the industry. But Goldman earned $7.48 billion in 2012, up 68% from the previous year.
The firm set aside $12.9 billion for employee compensation and benefits for 2012, or 37.9% of the firm’s revenue for the year, the second lowest percentage since Goldman went public in 1999. In 2011, the employee comp pool was lower – $12.22 billion – but represented 42.4% of total revenue.
The situation was similar at other New York firms. U.S. offices, at least from an investment banking and wealth management perspective, helped buoy the end-year results for several banks – Barclays and Deutsche Bank in particular – but didn’t see their usual percentage of the profits.
“Several groups had their best year ever, killed their numbers and pay was flat,” a Deutsche Bank i-banker told eFC earlier this month.
A 300% increase in profit – all while relying on a smaller workforce – and a 9% bump in cash bonuses? It’ll be interesting the see what happens to cash bonuses if Wall Street banks actually falter in 2013.