Wall Street bonuses to rise 15 percent this year

Wall Street bonuses will rise 15 percent this year, with larger increases for investment bankers and equities traders as merger activity surges and stocks rise, according to a study released.
Bonuses for bankers will probably jump 25 percent, and equities traders may take home 20 percent to 25 percent more, according to the study by Johnson Associates Inc, a New York compensation consultant.
Employees in slower-growth areas such as retail banking will see smaller gains, with bonuses rising as little as 5 percent, the study said.
The increases would follow a 46 percent jump in first-half profit to more than $13.5 billion at five big investment banks - Bear Stearns Cos, Goldman Sachs Group Inc, Lehman Brothers Holdings Inc, Merrill Lynch & Co and Morgan Stanley - after a record 2005.
Global merger volume totalled $1.84 trillion in the first half, while global equity volume surged 46 percent to $322 billion, according to Thomson Financial.
"It shows how resilient these financial services firms have become," Alan Johnson, a managing director at Johnson Associates Inc, said in an interview. "They are riding over bumps in the road, such as energy prices, a slowing housing market, war and terrorism, and are doing financially very well."
He also said competition is rising because "firms are starting to hire more, not wildly but increasingly."
Compensation is also surging at commercial banks with big investment banking units.
Last month, Citigroup Inc, the world's biggest stock and bond underwriter, said investment banking pay from January to June rose 39 percent to $5.73 billion. J. P Morgan Chase & Co reported a 50 percent increase to $4.22 billion.
Investment banking bonuses often comprise the bulk of overall pay. A top banker or trader can receive seven- or even eight-figure bonuses after a stellar year.
"A lot of people are already making an enormous amount of money" before bonuses, Johnson said. "Now they can make twice as much of an enormous amount of money."
Bonuses for asset managers may increase 10 percent to 15 percent this year, with larger gains in alternative areas such as hedge funds. Fixed-income traders may see similar increases.
In contrast, employees in commercial and retail banking may take home just 5 percent to 10 percent more, reflecting narrower lending margins as interest rates rise, credit losses, and weakness in mortgage banking.
In January, New York State Comptroller Alan Hevesi estimated that Wall Street bonuses rose 15.5 percent last year to a record $21.5 billion.
"Certainly, for London and New York, these are extremely important figures because they generate a follow-through impact on the economy, for such things as restaurants, hotels, and housing," Johnson said.