Investment banks paid employees in New York City a record $21.5bn in bonuses last year, surpassing the previous record set during the bull market in 2000 by 10 per cent.
Alan Hevesi, New York State Comptroller, released his forecasts for bonuses on Wednesday. He said bonuses paid by Wall Street banks grew by an estimated 15.5 per cent from a year earlier. The average bonus of $125,500 also set a record.
“The securities industry had a very good year during 2005,” he said.
Investors will this month continue to learn just how good the year was as Merrill Lynch and other investment banks report full-year earnings.
Some Wall Street banks including Lehman Brothers and Goldman Sachs reported record profits in December.
These and other banks were able to pay higher bonuses because they boosted revenue thanks to success in arranging mergers and acquisitions and trading equities and fixed income securities. Wall Street banks tend to pay employees about 50 per cent of net revenue. Goldman Sachs last year had expenses of $11.69bn related to compensation and benefits for its employees worldwide.
Wall Street employees tend to make the bulk of their compensation in year- end bonuses.
For instance, a partner-level managing director at Goldman Sachs would be paid a salary of $600,000 and would then be given a mixture of stock and cash that could easily be seven figures and possibly eight. Mr Hevesi estimates New York state will collect $1.5bn in tax revenue from bonuses while New York City will collect $500m.
Several investment banks, including Goldman, Lehman and Bear Stearns, also boosted headcount last year.
Employment in the securities industry in New York City totalled 174,000 in November, up 5 per cent from last time. The state comptroller’s office says each new job created in the securities industry results in three jobs elsewhere.