The investment banker compensation model includes a base salary in addition to potential year-end bonuses. Many investment bankers are employed by large financial institutions in New York City in the Wall Street area. A bankers' earnings potential can be exceptionally lucrative even if the base salary is not excessive. In 2010, Wall Street firms JP Morgan and Goldman Sachs paid investment bankers an average of $369,651 and $430,700, respectively, according to Bloomberg.
Many investment bankers graduate from Ivy League universities and continue to earn a masters of business administration degree. These financial workers support the deals that keep the capital markets moving, including mergers and acquisitions, initial public offerings and corporate restructurings. When the economy falters, it effects capital market activity and the focus of investment banking deals might shift to advising companies through bankruptcies.
In addition to base pay, an investment banker earns a bonus at the end of the year. The bonus is largely influenced by the amount of business that the banker introduced to the firm. Compensation structures vary, and could include a cash salary and a bonus that can be paid in cash or with company stock. Wall Street serves as the financial capital of New York, and most of the major investment banks have headquarters in New York City.
The effect of the financial crisis of 2008 and 2009 left investment banks reeling, causing global institutions such as Lehman Brothers to go bankrupt. In the wake of the crisis, investment bankers' salaries had not recovered to levels achieved prior to the recession, according to a March 2011 article in New York Magazine. Before tax, the average mid-level banker compensation was $1.6 million in 2011, a 27 percent decline from before the recession.
Compensation in the investment banking industry fluctuates based on market conditions and internal conditions at the bank. According to Bloomberg, Bank of America earmarked 10 percent less for investment banker compensation in 2011 versus 2010. Compensation at other investment banks, including JP Morgan and Goldman Sachs, was reduced by 2.4 percent and 14 percent in 2010, respectively. A compensation expert cited in the article attributed the decline to a volatile environment, suggesting that the reductions at Bank of America could have been more severe.