Wall Street bonuses: payouts down, anxiety up

Investment bankers hate bonus declines. But a no bonus year is a far worse fate. On Thursday, the New York state government released its annual data on Wall Street end-of-year payouts. The average cheque for the 2022 cycle was $177,000. That is a quarter below the record figure of $240,000 in 2021 — a year when everything from Spacs to leveraged buyouts to stocks were booming.

Perspective is required. The 2022 figure still beats 2018 and 2019, both fine years. The worry is what is going to happen this year. Rising interest rates and collapses in the banking sector have put M&A and IPOs on ice. Goldman Sachs has sacked thousands of employees. Rivals may have to follow suit if the revenue drought continues.

Data from the New York comptroller reflects only broker-dealer pay, which it screens through tax withholdings. Bonus growth accelerated in the middle of the noughties, rising well into six-digits. The 2006 median bonus of $191,000 remained the highest figure until 2020.

With the growth of private equity, hedge funds and other shadow banking groups, pay at securities firms now offers only a limited snapshot of Wall Street too. The 190,000 people employed in the securities sector, according to New York state, has hardly changed since the financial crisis.

Angst over the vicissitudes of Wall Street feel different, however, following the peak of the pandemic. New York finances have since been in flux, though buttressed by massive amounts of federal aid. The local government has already flagged that lower property tax assessments will hit revenue — a third of city revenue is derived from general property taxes.

The big winners from the bonus set may be residential landlords. The median monthly rental in February for a Manhattan apartment exceeded $4,000, a tenth higher than the previous year. For some bankers, their expensive digs will get more use given less time spent in offices — or perhaps none at all.