Goldman Sachs and JPMorgan Chase, following a record year for deal activity on Wall Street, are preparing to pay out bumper bonuses to their investment bankers. Due to a rush of dealmaking, investment banks generated record fees, with the value of US deals in the first 11 months of 2021 totalling a record $2.3 trillion. According to their financial statements, Goldman Sachs and JPMorgan Chase took in more investment banking fees than all other banks, which has led Goldman to consider increasing its bonus pool by about 40-50 percent over the previous year, while at JPMorgan the pool could be as much as 40 percent larger. As David Solomon, Goldman’s chief executive, said in an earnings call in October, “We are a pay-for-performance culture, and there’s no question that people are performing.”
Indeed, in the first nine months of 2021, Goldman reported $10.6 billion in revenues from investment banking, up about 65 percent from a year prior. Meanwhile, at JPMorgan, investment banking revenues in the same period were up 41 percent on the year at $9.7 billion. As pay is by far the biggest expense for the banking sector, the significant increase in the size of bonus pools at the major investment banks is a solid indicator of their performance this past year, despite the challenges presented by such factors as the pandemic and rising rates of inflation.
The news of larger bonuses on the way for investment bankers is just the latest in a series of positive indicators for the profitability of the banking sector. Goldman and JPMorgan had already raised salaries for junior investment bankers who complained of burnout during the pandemic, and in November of 2021 New York-based consultant Johnson Associates had estimated that Wall Street bonuses would rise 20-25 percent in advisory work on mergers and acquisitions, and 30-35 percent for bankers who work on underwriting for equity and debt deals. Johnson Associates also forecasted that bonuses for Wall Street bankers would be the highest seen since 2009, at the tail end of a year that saw record levels of deal-making activities as economies reopened and optimism returned for a time.
