Wall Street bonuses rise 17% as securities industry boosts city, state tax revenues

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Securities industry profits surged for the second year in a row, with the average bonus paid to Wall Street workers jumping 17% to $184,220 in 2017, according to an estimate released Monday by New York State Comptroller Thomas DiNapoli.

The 2017 bonus pool for securities industry employees who work in New York City rose during the traditional December-March season to about $31.4 billion.

Pretax profits for the broker/dealer operations of New York Stock Exchange member firms increased 42% last year after rising 21% in 2016. Profits totaled $24.5 billion in 2017, the highest level since 2010.

“When Wall Street does well, the city and state benefit from higher tax revenues,” DiNapoli said. “The large increase in profitability over the past two years demonstrates that the industry can prosper with the regulations and consumer protections adopted after the financial crisis.”
New York City has about $37.7 billion of general obligation debt outstanding.

Moody’s Investors Service rates the city’s general obligation bonds Aa2, while S&P Global Ratings and Fitch Ratings rate them AA. All three assign stable outlooks.

New York State has about $49.6 billion of GO debt outstanding. Its GOs are rated Aa1 by Moody’s and AA-plus by S&P and Fitch.

Wall Street is the engine that drives much of New York City’s economic growth. While the securities industry accounts for less than 5% of the private sector jobs in the city, it generates more than one-fifth of all private sector wages. DiNapoli estimates that one in 10 jobs in the city is directly or indirectly associated with the securities industry.

However, after adding securities industry jobs in the city for three straight years, employment dipped last year, DiNapoli said. Sector employment remains 6% lower than before the financial crisis began in 2007, while other private sector jobs have grown by 23%.

DiNapoli estimated the securities sector accounted for 18%, or $13.5 billion, of state tax collections in state fiscal year 2016-2017 and 6%, or $3.2 billion, of city tax collections in city fiscal year 2017.

The state’s fiscal 2019 budget assumes statewide bonuses for the broader finance and insurance sector will increase 4%. The actual increase will likely be larger, as the securities industry in New York City makes up about three-quarters of the statewide pool for finance and insurance.

New York City’s budget assumes that the bonus pool for securities industry employees in the city will increase 11%. Based on DiNapoli’s estimate, the city may realize a small amount of additional revenue.

DiNapoli also reported:

  • Industry profitability last year was driven by higher net revenue, which increased by 4.5% to $153 billion. Areas of strongest growth include wealth management fees, underwriting and other income related to securities business, which includes fees from advising on mergers and acquisitions.
  • Trading revenue, which accounted for 8% of net revenue, fell sharply as the year progressed but was still up 10% for all of 2017.
  • The average salary including bonuses in the city’s securities industry was $375,200 in 2016 (the latest annual data available) and was five times higher than in the rest of the private sector average of $74,800. Twenty-three percent of the industry’s employees earned more than $250,000, compared with 2% in the rest of the city’s workforce.

“It is too soon to tell how increased volatility in the financial markets might impact profits in 2018,” DiNapoli said.

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