Wall Street Bonuses Up 15.5% to Record
Wall Street firms will pay their New York City workers a record $21.5 billion in bonuses for 2005 amid soaring profits, state Comptroller Alan Hevesi forecast Wednesday.
The average bonus for the city’s 174,000 investment bankers and other securities industry workers will rise 10% to $125,500, also a record, Hevesi said. Total bonuses will rise 15.5%, surpassing the previous record of $19.5 billion set in 2000.
“More money is going to the stars than ever before,” said Michael Kelly, an executive recruiter at Michael Kelly Associates in New York. “The big money is going to the investment bankers and the traders because they’ve had a record year.”
Bankers who help arrange acquisitions, Wall Street’s most profitable business, got the biggest bonuses, which Kelly said might be as high as $15 million. Compensation rose as earnings at Goldman Sachs, Lehman Bros., Morgan Stanley and Bear Stearns Cos., four of the top five U.S. investment banks by market value, jumped 15% to $14.6 billion. Trading revenue surged 20% for the year.
Compensation on Wall Street typically consists of base pay of $175,000 to $250,000 for a senior managing director plus bonuses, which are announced in December or January and paid during the following month.
Bankers who stand to gain the most include Jack Levy, 52, and Gene Sykes, 47, co-heads of mergers and acquisitions at Goldman, the world’s biggest merger advisory firm. Goldman worked on $594 billion of completed mergers and acquisitions in 2005, an increase of 22% from the previous year.
“M&A; bankers and commodities traders will probably do best, but fixed-income and emerging-markets people will also likely do well,” said Peter Gonye, an executive recruiter at Spencer Stuart in New York. “Many firms did not pay so well in the last couple of years, and now with bigger coffers they’re in a position to make allegiance payments.”
Employment in the securities industry has rebounded since the Standard & Poor’s 500 index dropped 40% from 2000 through 2002 and 100,000 financial services workers lost their jobs worldwide. New York City added 8,700 Wall Street jobs in 2005, a 5.3% increase from the previous year, Hevesi said.
The state will collect $1.5 billion in tax revenue from the bonuses, and New York City will get almost $500 million, the comptroller said. He estimates that every job created in the local securities industry supports two more jobs in the city and a third in the suburbs.
