Posted by Leonard Steinberg on January 7th, 2012

Banks will start posting results for the fourth quarter and year end starting next week, and the results are poised to be weak. Weak results result in many things, so here is my evaluation:

1)   Bonuses will probably be down rather sharply from last year, I would estimate about 25% on average, although with the large volume of layoffs the smaller bonus pool will be spread out amongst a smaller pool of recipients. I have also heard that those at the very top will get very solid bonuses, and while off their peaks, will be designed not to lose the best people to competing banks.

2)  Lower bank profits + lower bonuses and lower banker incomes = lower tax revenues. That’s not good for New York City and State’s tax coffers. Unless there is a turnaround in the first quarter of 2012, expect City Hall and Albany to institute further cuts…..or worse, raise taxes although that would be highly unlikely in an election year.

3) Fewer banker dollars will also equate to fewer banker buyers of New York real estate, although the very high end will not be affected too badly as those buyers are not that reliant on their bonuses. There will be fewer nouveau riche banker buyers for sure.

4) Lower banker incomes will make banking less attractive to some as a career path, and already we have witnessed many bankers who have switched careers altogether. Then there are those bankers who are leaving the large blue-chip banks for smaller financial institutions. We are amazed at the number of ‘alternative’ financial institutions popping up to provide financing traditionally only provided by the larger banks.

THE Leonard Steinberg OPINION: While lower banker income is a negative for Manhattan real estate, these lower incomes may actually translate to healthy BANKER PR: The country is anxiously seeking some punishment for bankers after the huge wave of resentment spurred buy the Occupy Wall Street movement. A year’s hiatus of excessive pay may in fact bode well for the industry. And while there are many that will be earning less, I feel certain a strong group, especially on the high end, are doing rather well. I suspect there is a small club who made small fortunes in 2011 amid all the turmoil and volatility. Looking forward, old model banking is no longer a model for huge, excessive profits anymore, but I am confident bankers will soon find alternative models for doing business that are hugely profitable. Fortunately, Manhattan is no longer entirely reliant on banker bonuses for a healthy real estate market.