Wall Street bonuses fell last year by the most since the financial crisis, dropping 26 per cent to an average of $176,000 amid higher rates and a decline in dealmaking, according to a report from the New York state comptroller.

The drop in payouts — the biggest since 2008, when year-end incentive payments fell 43 per cent — came as a rocky stock market led to a dearth of deals last year. The comptroller’s office blamed the drop in bonuses on a rise in interest rates, recession fears and the war in Ukraine.

Still, bonuses, which typically make up more than three-quarters of the total remuneration of Wall Street dealmakers and traders, did not drop as much as some of the industry’s key businesses. Wall Street groups led just 71 initial public offerings in the US last year, raising $7.7bn, down nearly 95 per cent from the $142bn that was raised in IPOs the year before. The value of deals in the US also dropped significantly, down 40 per cent last year.

That contributed to a 56 per cent drop in New York state’s profits from financial activity, the comptroller’s office said in its report on Thursday. Still, financial industry employment rose 6 per cent last year to 190,800 in New York state, the highest level in more than two decades, according to the comptroller, and the job growth drove a decline in individual bonuses.

However, Wall Street has taken a tougher approach to cost-cutting this year, including workforce reductions. Goldman Sachs eliminated 3,200 jobs in January. Asset management group BlackRock announced 500 cuts that same month and lay-offs are expected at other financial groups as well.

Last year’s drop in bonuses followed two years of robust year-end pay during the pandemic. Bonuses rose 28 per cent and 12 per cent in 2020 and 2021 respectively. Payments peaked at $240,400 in 2021, the largest year-end payouts on record.

New York state comptroller Thomas DiNapoli said the large drop in Wall Street’s year-end payouts would have an impact on New York’s tax revenue and economy, though he said that would be partially offset by having employees back in their offices, spending money on lunches and commutes. DiNapoli said financial groups in the state reported that nearly 60 per cent of their employees were back in the office on a regular basis in January.

“Employment in leisure and hospitality, retail, restaurants and construction must continue to improve for the city and state to fully recover,” DiNapoli said in a statement.

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