2010 could become Wall Street’s second most profitable year ever

In spite of a fragile U.S. economy, 2010 could end up the second most profitable year for New York City’s securities industry, with the average Wall Street bonus topping last year’s figure due to fewer workers and high earnings, according to a report by the State Comptroller of New York.

Wall Street earned $21.4-billion during the first three quarters of 2010, said comptroller Thomas P. DiNapoli, exceeding the City’s estimate for the entire year ($20.6 billion).

While much less than last year's record of $61.4 billion, which was fueled by federal assistance, the securities industry is on track in 2010 for the second-highest level of profitability on record.”

However, in the aggregate, bonuses paid out to the Wall Street security industry employees will likely fall this year.

Last year Wall Street paid out $20.3 billion in bonuses, DiNapoli said, a 17 percent increase over the prior year.

“However, given compensation and revenue trends so far this year, it appears the cash bonus pool will be smaller than last year, although the average bonus may be somewhat higher since it will be shared among fewer workers,” he said.

“Regulatory reforms (both enacted and anticipated) could result in the deferral of a larger share of bonuses.”

The Wall Street Journal recently reported that bonuses on Wall Street, which peaked at about $35 billion in 2006, are expected to total about $18 billion this year.

Moreover, traders on proprietary trading desks are expected to be worst hit, with their bonuses cut in half.

The Options Group, an executive-search and consulting firm, said that, on average, bonuses on Wall Street may be down 22 percent to 28 percent this year from 2009.

DiNapoli also indicated that 2,700 securities and commodities employees on Wall Street lost their jobs between September 2009 through last September. But he believes Wall Street’s job losses may have peaked at 30,900 in August 2010.

“While the industry added 3,000 jobs in September and October, employment data have undergone significant revisions each month, and an annual restatement is scheduled for March 2011—which could change the current employment picture,” he said.

“With only two months of job gains and continued reports of firms downsizing as they restructure, we are reluctant to conclude that Wall Street is adding jobs on a sustained basis. However, if the industry is adding jobs, the State and City economies (and tax collections) will surely benefit.”

Similarly, in a report by City Comptroller John Liu, he noted the astounding recovery of financial firm profitability in 2009 has been followed by a mixed year in 2010, yet total compensation in the industry is expected to be up modestly once year-end bonuses are paid.”