For employees at the biggest Wall Street firms, 2012 brought a humbling post-crisis reality of job cuts, lower pay and tarnished reputations. For investors, it was a happier story.
The 81-company Standard & Poor’s 500 Financial Index (S5FINL) is up 27% this year, its largest annual increase since 2003, led by a 104% gain in Bank of America Corp. The index beat the broader S&P 500 Index for the first time since 2006.
Bloomberg reports that shareholders, impatient for the industry to boost profit, were rewarded as Wall Street firms cut jobs and pay, and exited businesses. The shrinking unnerved employees, who watched the chiefs of two big banks lose their jobs and others contend with a drop in deal making and stock trading, stiffer regulations, trading losses, rating downgrades and scandals involving interest-rate manipulation and money laundering.
'There’s always grumbling on Wall Street, which is pathetic given how overpaid we all are, but there is a level of angst this year that is just unprecedented', Gordon Dean, who left a 26-year career at Morgan Stanley (MS) to co-found a San Francisco boutique advisory firm this year, said in a telephone interview. 'It’s just a profound sadness and dissatisfaction'.
Shareholders and bondholders who saw compensation costs at the nine largest global investment banks outpace the gain in revenue from 2004 to 2008 are witnessing a shift: Executives are more focused on investors than rainmakers.
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image: © Richard Harvey