Millionaire bonuses in City: Goldman Sachs partners and traders set the pace for end of year bonanza

UP TO 100 London staff of Goldman Sachs, the New York- based investment bank, are to receive performance-related and partnership bonuses of at least dollars 1m ( pounds 675,000) each this year on top of their basic salaries.

Some of the bank's 26 London partners are to be paid in excess of dollars 5m, and hundreds of other employees on performance-related packages will receive six-figure bonuses.

The bonanza is considered unprecedented even by City standards and follows a record trading year for the partnership and its London operation. Last year, it is thought to have made net profits of at least dollars 2.5bn.

Goldman Sachs is notoriously secretive about the way it remunerates its employees. Most partners are obliged to plough back substantial amounts of their pay into the bank's capital reserves. They are unable to recoup these until they leave or retire.

One source said that the dollars 1m bonus estimate considerably overstated the position. But he did not disagree that the numbers were 'very substantial'.

London is thought to have generated an exceptionally high proportion of the firm's worldwide profits last year, entitling many top traders and dealers to seven-figure commission payments. Goldman Sachs recently told employees that all 1,400 London staff would receive a minimum bonus of 30 per cent of basic salary this year.

It has also been a bumper year for other leading US firms, such as Merrill Lynch, Morgan Guaranty, Morgan Stanley and Bankers Trust. All are expected to report record profits. Bonuses are likely to be around a minimum of 30 to 40 per cent at many firms.

Salomon Brothers' London office has also had a record year, but the firm's performance has been undermined by its New York operation leaving it with what are thought to be some of the lowest bonus rates among leading City firms.

Many UK banks and securities houses also anticipate record profits this year, though none come close to the performance of the New York houses. Employees at SG Warburg and other UK merchant banks are looking forward to hefty year- end payments, even though bonuses paid in UK firms are traditionally smaller than in their US counterparts.

Securities houses have been able to exploit near-perfect trading conditions over the past year, with booming stock and bond markets, volatile currency markets and huge growth in lucrative new financial derivative markets.

Goldman Sachs has been particularly successful, with 1993 profits two-and-a-half times higher than in the previous year. The firm is helped by its partnership status, which keeps its tax bill to a minimum. Commission income from customer business rose by 32 per cent during the year, and profits from trading on its own behalf by 50 per cent. The firm is thought to have made a return on capital of 53 per cent this year - more than double the traditional Wall Street average.

The results confirm Goldman Sachs as the top- earning Wall Street firm. 'They've employed the very best people and they work the hardest,' said one rival London banker last week. Merrill Lynch is expected to be the second highest earning firm, with profits of around dollars 2bn, while Salomon will be trailing at around dollars 900m. Profits at SG Warburg, Britain's most successful merchant bank, are expected to come in at around pounds 260m, compared with pounds 148m last year.

Bonuses across a wide range of City firms are expected to be higher this year than at any time since the boom year of 1987, when Warburg doubled the salaries of many employees through special one-off Christmas payments.

Many traders with the American houses take the vast bulk of their pay in the form of performance-related bonuses, something that is still comparatively uncommon with British brokers and investment banks.