By Edward Krudy
NEW YORK (Reuters) - Wall Street cash bonuses are forecast to have risen in 2012 to their highest since 2010, but are still below pre-crisis levels, New York state's comptroller said on Tuesday.
The securities industry's bonus pool was expected to total $20 billion, Comptroller Thomas DiNapoli said at a press conference on Tuesday, up 8 percent from 2011 but below levels seen in 2006 and 2007, before the financial crisis.
The estimate is based on income tax withholdings and would include bonuses that were deferred from earlier years. The comptroller's office compiles estimates on Wall Street bonuses because of their importance to state and city tax revenues.
The rise in bonuses comes as profits for broker-dealer operations on New York Stock Exchange member firms was $23.9 billion in 2012, three times the $7.7 billion earned in 2011, and one of the most profitable years on record, the report said.
"As we all know and acknowledge the securities industry in New York City is a major driver of the city and state economy," said DiNapoli. "It's no secret that if Wall Street is strong all New Yorkers benefit."
The securities industry on Wall Street and beyond is still going through a period of major change after the 2007-2008 financial crisis, with increased oversight from regulators. The industry has far fewer employees and is changing it compensation practices to include more deferred bonuses.
Morgan Stanley
DiNapoli said he expects Wall Street to continue to cut jobs in 2013. Employment totaled 169,700 in December 2012, 1,000 fewer than the year before, according to the report. The securities industry in New York has regained only about 30 percent of the 28,300 jobs it lost during the crisis.
"I think we're still in a recovery mode," said Joe Sorrentino, a managing director at Steven Hall & Partners, a compensation consultant to Wall Street firms. "In essence, all they are saying is that things are better than in 2011. That doesn't sound too confident to me."
Still, the report was another sign the industry is stabilizing after the ravages of the crisis.
Federal Deposit Insurance Corporation said earlier that the banking industry's full-year earnings were the second-highest on record at $141.3 billion, an increase over 2011 of $22.9 billion, or 19.3 percent. Bank earnings peaked in 2006 at $145.2 billion.
Much of the earnings growth in 2012 came from banks reducing the amount they set aside for losses on loans, the FDIC said. Banks also saw gains on loan sales and higher servicing income.
The average cash bonus rose an estimated 9 percent to almost $121,900 in 2012, the comptroller said. The average bonus rose more than the overall pool because the pool was shared among fewer workers than in 2011.
"The industry is still adjusting to the current economic and regulatory environment, working through the fall out of the financial crisis," said DiNapoli. "The industry continues to announce layoffs and will likely continue to restructure."
In 2012, about 14 percent of New York State tax revenue came from Wall Street, down from 20 percent before the financial crisis, while the industry's contribution to New York City's tax fell from a peak of more than 12 percent to less than 7 percent.
The comptroller's estimate does not include stock options or other forms of deferred compensation.
(Additional reporting by Jed Horowitz; Editing by Maureen Bavdek and Nick Zieminski)
