Wall Street’s five biggest investment banks are expected to pay a record $38 billion (£18.6 billion) in staff bonuses this year, even though the shareholders in those firms have collectively lost about $74 billion in stock declines this year.

The bonuses will be split between 186,000 staff globally at Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns, according to data compiled by Bloomberg News. This year’s bonuses would compare with the $36 billion paid by Wall Street’s five biggest firms last year and equate to $201,500 per person. Collectively, the bonus is larger than the gross domestic products of Sri Lanka, Lebanon or Bulgaria, while the average payout is more than four times the $48,201 median household income in America, according to the US Census Bureau.

Wall Street’s bonus pool is largely derived from the phenomenal surge in mergers and acquisitions in the first half of the year, before the credit crunch significantly reduced the volume of deals over the summer. Yet even with the recent slowdown, the five banks have made a record $9 billion in fees from arranging deals as private equity firms made an unprecedented volume of acquisitions.

The banks have made a further $5 billion of fees from underwriting initial public offerings and arranging sales of junk bonds used to finance leveraged buyouts, according to Bloomberg data.

The sharp increase in deals contrasts with the slump in the value of mortgage-related investments as the bottom falls out of the housing market in the United Sta tes. As a result, the distribution of bonuses is expected to be much less even than in recent years. Employees involved in packaging and trading mortgage-backed securities are likely to see their bonuses drop by between 30 and 35 per cent across Wall Street as a whole this year.

Investment bankers and commodities traders could benefit from gains of up to 20 per cent, while equity traders are likely to see an estimated 5 per cent rise, and equity derivative traders could be up by 20 per cent.

Global Alpha, which entered 2007 with more than $10 billion of assets, lost 37 per cent of its value on loss-making in the year to November 14, and is expected to lose a further $2 billion from client “redemption notices” issued this quarter. The losses emerged after Goldman said last month that it would not shut down Global Alpha, a so-called quantitative fund that uses computer models to determine its trades. The fund generated $700 million in fees in 2006, after returning almost 40 per cent the previous year.

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