Wall Street bonuses are expected to have hit a record $21.5 billion in 2005 from $18.6 billion in 2004 as investment banks reaped record earnings, New York State Comptroller Alan Hevesi said Wednesday.
Last year’s bonuses beat the record of $19.5 billion set in 2000 at the peak of the equities boom, Hevesi said during a conference call with reporters.
Booming merger and underwriting activity, as well as a stock market rebound, helped revenues rise by almost 50 percent in the first three quarters of last year.
“2000 was the peak of the greatest boom in our modern history. It was a remarkable time, so this is very good news,” Hevesi said.
Wall Street is the prime engine of growth for both New York City and New York State, so the profitability of the financial sector is key for the area’s economy.
New York’s financial sector employs about 174,000 people, according to Hevesi’s estimates.
Hevesi said the average bonus in 2005 was $125,500 — or $25,000 more than in 2000.
Bonuses make up the bulk of Wall Street compensation and can be more than 10 times the base salary for top producers.
“The reason for this is financial sector revenues are up dramatically in the first three quarters of 2005, up 44.5 percent. That’s gross revenue,” Hevesi said.
Record earnings last year on Wall Street yielded windfall bonuses for the industry’s top brass.
Goldman Sachs Chairman and Chief Executive Henry Paulson received a compensation package worth about $38 million — 21 percent more than the year before — while Morgan Stanley Chairman and CEO John Mack got $11.5 million for his five months of service in fiscal 2005, although the board offered to pay him an annual bonus of $28 million.
The state’s Democratic comptroller said profits also were up “substantially,” but were modified by interest rates.
Last year, merger activity accounted for a big part of the banks’ higher revenues.
“Mergers and acquisitions dollar figures are up 28 percent and have reached over $1 trillion in activity in terms of the dollar value of the deal,” Hevesi said.
Investment banking analysis firm Dealogic said in December the value of U.S. merger deals as a whole was 30 percent higher in 2005 than in the previous year.
Tax revenue collection from the financial services industry reached $1.5 billion, marking an increase of $200 million from the previous year, Hevesi added.