Goldman Sachs average pay and bonus to hit £500,000

The age of the City mega-bonus returned today after investment bank Goldman Sachs unveiled £2 billion profits.

The Wall Street giant's 5,500 London staff can look forward to record average payouts of around £500,000 each at the end of the year from a global pot of £14 billion, the Standard has learned.

Senior executives working at the bank's European headquarters in Fleet Street will get bonuses of several million pounds each with the highest paid as much as £10 million.

Rivals such as Morgan Stanley, Deutsche Bank and Barclays also look set to pay bumper bonuses.

Critics said investment banks had "learned no lessons" from the mood of public outrage that followed last autumn's near total collapse of the world financial system.

Some MPs are demanding that bankers be hit with a punitive 90 per cent tax on bonuses. Vince Cable, Liberal Democrat Treasury spokesman, said: "This suggests that far too many people in the banking sector are going back to business as usual and appear to have learned no lessons from the past." Critics claim the excessive risk-taking that caused the financial collapse was fuelled by lavish pay and bonuses.

The expected windfalls are bigger than forecast and come after Goldman's second quarter results smashed even the most bullish predictions.

Along with other investment banks it has profited from the turmoil in financial markets and the vast sums of public money that have been injected by governments to save them from total collapse.

The second quarter results showed that the bank made revenues of £3.8 billion from trading bonds and foreign exchange, £2 billion from trading shares, £450 million from underwriting fundraising by client companies. Overall revenues leapt 46 per cent to £8.3 billion.

The results mean the bank is making more money than ever before — apart from the bumper year of 2007 which came before the financial crash. The profits mean it will pay hundreds of millions in tax to the Government. Goldman typically distributes half of its revenues in pay and bonuses to staff. It has now set aside £7 billion into its bonus pool — and analysts say the pot should reach £14 billion by the end of 2009.

It comes just months after the bank accepted a £6 billion bail out from the US government. It paid back the money last month, freeing it to pay executives as it wishes.

Top earners in London are likely to include co-chief executives Michael Sherwood and Richard Gnodde, and head of European investment banking Yoel Zaoui.

All the surviving investment banks have benefited from the collapse of rivals such as Lehman Brothers and Bear Stearns. It emerged today that Goldman executives sold almost £431 million worth of shares in the bank following the collapse of Lehman Brothers last September.