There is a belief on Wall Street that bonuses paid to employees at other leading securities houses, which include Salomon, Morgan Stanley, and JP Morgan, will be up to 45 per cent higher that last year's payouts.
However, several analysts are predicting that the bubble is about to burst. Sallie Krawcheck, an analyst at Sanford C Bernstein, predicts that profits at securities houses have "nowhere to go but down".
Goldman's pre-tax earnings rose 69 per cent in the fourth quarter to the end of November to $743m, buoyed by investment banking, trading and asset management. John Thain, Goldman's treasurer, said the quarter was its third-best ever.
The result boosted the total taxable profit for the year to $2.6bn, only slightly below the record $2.7bn that Goldman made in 1993. Fourth-quarter revenue amounted to $1.54bn, taking the year's total to $6.14bn.
The profits increase has come as surging stocks and low interest rates boosted stock and bond underwriting and mergers and acquisitions. "The market environment was singularly favourable to Goldman," said John Keefe, an independent securities analyst. "They had a great share of underwriting and lots of merger and acquisition activity - there were lots of opportunities for them."
Goldman was the leading US underwriter of common stocks in the last three months. It arranged $7.9bn of sales for clients, according to Bloomberg Financial Markets.