Wall Street bonuses drop 2% in 2023 despite banks’ higher profits — here’s why

Wall Street’s belt-tightening led to bonuses hitting their lowest levels since 2019 – despite the industry reporting higher profits last year.

Average bonuses in the financial sector shrank by 2% to $176,500 last year, New York State Comptroller Thomas DiNapoli reported Tuesday.

The 2% drop pales in comparison to the 25% decline in 2022, when the average bonus fell to $180,000 from $240,000 the previous year.

The smaller bonuses were paid out despite a 1.8% increase in overall profits on Wall Street in 2023, said DiNapoli’s office, which attributed the slight decline to more workers getting hired.

“Wall Street’s average cash bonuses dipped slightly from last year, with continued market volatility and more people joining the securities workforce,” DiNapoli said in a statement.

The securities industry accounts for about 27% of annual state tax collections and 7% for New York City.

The state and city have already budgeted for lower tax revenue from financial workers, he added.

“While these bonuses affect income-tax revenues for the state and city, both budgeted for larger declines so the impact on projected revenues should be limited.” DiNapoli said.

Last year, financial firms paid out the bonuses out of a pool that stood at $33.8 billion – which was around the same sum as the 2022 pool.

The $33.8 billion figure stood in sharp contrast to the $42.7 billion pool that was paid out in 2021, when Wall Street was flush with cash.

At the time, borrowing money was cheap. In the US alone, there were $1.8 trillion worth of mergers and acquisitions in the first eight months of 2021.

But soaring levels of inflation have forced the Fed to hike interest rates, creating uncertainty in the markets.

The industry employed 198,500 people in 2023, up from 191,600 the prior year, the report showed.

The increase in headcount came as major US banks such as Citigroup, Goldman Sachs and Morgan Stanley cut more than 23,000 jobs worldwide.

Although some firms reduced their staffing, employees who were laid off did not leave the workforce and were hired by other companies, DiNapoli said in a call with reporters.

“So far this year, the markets have been pretty positive, and we hope that will continue,” he added.

About 1 in 11 jobs in New York City is either directly or indirectly associated with the sector, the comptroller’s report showed.

DiNapoli credited Wall Street’s push to get workers back into the office with increased subway ridership and more spending.

Earlier this month, Bloomberg News reported that Deutsche Bank had cut its bonus pool at the investment banking division by more than 10% due to a decrease in dealmaking last year.