Wall Street’s pre-pandemic boom has ended, NY Comptroller says

Wall Street earnings slid in the first half of 2022 signaling an end to the pandemic boom that saw record payouts, according to New York State Comptroller Thomas P. DiNapoli.

The annual New York City securities industry report predicts a 22% drop in record-high compensation packages of 2021. Though the plunge could be more, funds set aside for bonuses have been reduced by 6.5% in the first half of the year.

The pre-tax profits earned during the first six months of 2022 were down 56.3%. It fell from $31 billion to $13.5 billion earned in the same period last year.

The contributing factors for the decline in revenue included a 47.9% drop in income from trading, underwriting, and securities activities in firms, and the lowest equity offerings since 2003. These were further augmented by multiple rate hikes by the Federal Reserve, which drove interest expenses up $7.5 billion – triple that of the first half of 2021.

“The last two years of profits and bonuses fueled in part by the extraordinary federal response to the pandemic were not sustainable,” DiNapoli said. “The securities sector was a buffer for state and city revenues during the pandemic. As the sector slows down in 2022, leading firms are reviewing staffing and office space needs and a prolonged downturn could negatively impact state and city coffers.”

A report issued by Partnership for New York City claims that 56% of financial services employees were in office on a given day in September as compared to 49% for all firms.

DiNapoli anticipated that to stop the decline in Wall Street tax revenues, other sectors that were slow to recover needed continued support to get back to pre-pandemic levels.

The performance of the securities industry is primarily measured by the pretax profits of the broker-dealer operations of the member firms of the New York Stock Exchange. The number of such firms has declined from 200 before the global financial crisis in 2007 to 126 at present.

Though New York City continues to rule the U.S. securities industry, its share of industry jobs has fallen to 17.6%, the report found. It once boasted of holding one-third of all industry jobs.

“I have concern about any job going,” DiNapoli said in a press call. “I hate to put it this way, but it could have been a whole lot worse. There’s many unique attributes about New York City and smart, creative people wanting to be here, and that’s not going to go away. I think many of the folks at the upper end of these firms have big commitments to New York City.”

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