In a year when Wall Street bonuses are forecast to fall 10 to 15 percent, payouts will climb at Goldman Sachs.
Last year, Goldman accounted for $16.5 billion of the $36 billion dollars Wall Street's top five brokerages dished out to employees around the world. This year, that number is seen rising at least 22 percent.
"This year we estimate the bonus pool should be $38 billion dollars out of which $20 billion plus is going to be with Goldman Sachs in their bonus pool," said Michael Karp, CEO of the executive search firm Options Group.
In what compensation consultants are calling an "aberrant" year for Wall Street pay, Options Group says payouts will vary greatly from firm to firm, and from division to division within those firms. You can blame the credit crunch for the disparity.
When it erupted this summer, Wall Street was on track to post another year of record profits. Goldman remains on that track thanks to the bets it made against mortgages and mortgage related securities. Other firms didn't, and as a result, Goldman rivals like Merrill Lynch, Bear Stearns and Morgan Stanley face multibillion dollar writedowns, while some of their employees face smaller bonuses.
Most of the pay pain will be felt in fixed income. Here Options Group forecasts bonuses will drop an average of ten to fifteen percent. Among those expected to be hurt the most at bonus time, managing directors of mortgage backed securities who could see a 33 percent to 60 percent decline in pay. Options Group forecast their bonuses will fall to $1 million, down from last year's $1.5 million to $2 million dollars. Vice presidents of credit derivatives trading won't fare much better. Bonuses for this group are expected to be slashed 15 to 20 percent to $500,000 to $600,000.
Given fixed income was really this year's only problem child on Wall Street, if you work in commodities, currency or equity trading, or if you are an investment banker, you will probably get a bigger bonus than you did last year. That is because commodites and currencies have been on a tear, and while mergers and acquisitions have slowed considerably since this summer, this year's earlier deals guarantee the bankers who put them together will get bigger bonuses than in 2006.
For example, a managing director of commodities trading could earn a $5 million to $7 million dollar bonus, according to Group Options. That is a 15 to 20 percent jump from last year. And if you are a vice president of equity derivatives trading your bonus could be 10 to 15 percent higher at $400,0000 to $500,0000. Even first year investment banking associates are going to be seeing more money this year, with bonuses forecast to be between $200,000 to $250,000, a ten percent jump.
What has people worried though is not the decline expected in this year's bonus pool, but what next year might, or might not bring. Bonuses could shrink again next year if M&A activity doesn't pick up, and if the fixed income markets remain in their current fix.