Bank Bonuses Surge; Goldman Sachs Executives May Earn More Than In 2006
As the gap between the size of the largest and smallest U.S. banking institutions has widened this year, so has another metric: the average salary of individual investment bankers and those working in other industries.
While many Americans will count themselves lucky to be drawing any kind of income at all this year, bonus payments will rise by 40 percent for most bankers, according to a recent survey conducted by New York-based Options Group. The survey's results are supported by recent NYSE data which suggests that Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), JP Morgan (JPM), Morgan Stanley (MS), and Wells Fargo (WFC) have set aside $112 billion in compensation for their employees this year.
The exchange adds that for many bankers, compensation will exceed the amount they earned in 2007, when the economy was in a significantly stronger position in terms of national unemployment data.
In fact, in the case of Goldman Sachs, average salary payouts are likely to top even those in 2006, a year in which the global economy zoomed ahead. In 2006, employees at the firm earned an average of $622,000 each; in the first 9 months of this year, the bank set aside compensation of $16.7 billion, or $527,192 per employee. If Goldman Sachs continues to allocate a similar amount of money to compensation of employees in the fourth quarter, the average payout at the firm will amount to around $688,000 per capita, or a massive 10 percent increase over individual earnings for 2006.
Even banks which are still TARP-tied are paying some handsome salaries to their top employees. Earlier in the year, Citigroup gave $11.7 million in stock awards to three of its senior bankers, and increased their basic salaries by $300,000. In October, Treasury Paymaster Kenneth Feinberg approved $118.4 million of salary payouts for 21 of the firm's top executives. Still, unlike those at Goldman Sachs, the Citi bankers are taking a big hit year-on-year: they will get paid an average of just $5.6 million vs. $18.6 million in 2008.
Banks have derived huge earnings this year from a stock market rally and a surge in mergers and acquisitions activity, mostly fuelled by a $1.5 trillion government cash stimulus.
The salary payouts show how little has changed for those who have managed to remain in their jobs in the financial services industry. It also demonstrates how big an impact the massive government stimulus packages earlier in the year have had. For the billions of dollars which Treasury officials pumped into individual banks have resulted in an extremely divergent earnings scenario in the economy. While the average industry in the U.S. has either shrunk or remained flat year-on-year (here is an example from the IT industry), in the land of investment banking, a number of firms and professionals are headed for some their best years in a long time.