Business

Street bonus pool, already shallow, is drying up

The final tally on this season’s Wall Street bonuses is in — and it’s brutal.

Payouts for 2012 are at historic lows, as average compensation for traders and bankers has plunged by almost 40 percent from the previous year, according to surveys and industry analysis.

This sharp slide continues a dismal trend, with the average bonus for a huge swath of Wall Street employees barely reaching, or falling below, $100,000 for 2012 work.

In 2011, the average Wall Street bonus fell to $121,000 from $139,000 in 2010 and $141,000 the year before, according to the Office of the New York State Comptroller. The last time Wall Street had such a miserable bonus season was during the financial crisis. (The average bonus in 2008 hit $101,000.)

“It’s been another tough year on Wall Street, and probably across all bonuses categories,” said Kevin Callahan, CEO of electronic-trading firm AX Trading Group. “We’re in the equity-trading world, and we hear it every day. Volumes are down double digits.”

Those volumes generate profits that power many of the bonus mills — so a plunge in those bonuses was inevitable, says George Hessler, CEO of trading operator Deep Liquidity.

Aside from bankers at isolated holdouts such as UBS, who apparently are in the dark about their latest bonuses, most are either aware of, or have already received, their 2012 comp. The average fell by more than a third, or 36 percent, in 2012 compared with the previous year, according to the 2012 eFinancialCareers Bonus Survey. Front-office pros, such as bankers, traders and other front-office revenue generators, took the biggest hits: Their bonuses declined 38 percent over the previous year, according to eFinancialCareers. In contrast, workers in middle-office jobs (in the credit or risk departments, for example) saw 2012 bonuses decline 15 percent compared with 2011.

John O’Shea, chairman of Global Alliance Partners, said the chatter is that any employee at one white-shoe firm who generates income of $350,000 or more annually was paid a bonus this season that vests over three years. People familiar with this arrangement identified the firm as Morgan Stanley, noting that this kicks in on bonuses at the $50,000 level and above. The first tranche of the bonus, half cash and half stock, is not paid out for a year, these people say. No cash, therefore, is paid in 2013. Morgan Stanley had no comment.

Wall Street has sharpened the sword. The new comp model stresses “pay-per-performance,” and adjusts for risk-taking, eFinancialCareers notes.

None of this surprises Global Alliance’s O’Shea.

“Some people are being told, ‘You are lucky to have a job, so just hang in there,’” O’Shea said.