Lehman Brothers said it would pay its average member of staff $335,441 (£170,933) this year as it reported a record fourth-quarter profit of $1.0 billion, capping its most profitable year ever.

The US investment bank is paying its 25,936 staff a total of $8.7 billion in salary, bonuses and other benefits for 2006 on the back of a 23 per cent rise in net income to a record $4.0 billion.

Profits for the fourth quarter jumped by 22 per cent, from the year earlier period, to $1.0 billion, as revenue from fixed-income sales and trading rose by nearly a third to $2.1 billion.

Revenues from equities sales and trading rose by 21.6 per cent to $900 million for the quarter, ended November 30, although fees from advising on mergers and acquisitions increased by only 5 per cent – to $256 million – despite the surge in deals worldwide.

Lehman was not alone in announcing a record year for profits and bonuses this morning.

Bearn Stearns, the US investment bank best known for packaging home loans into mortgage-backed bonds, reported its highest ever quarter in the three months to November 30, chalking up a 38 per cent rise in net income to $563 million.

This fourth quarter profit was made on the back of a 25 per cent increase in revenues to $1.1 billion and a 58 per cent jump in investment banking fees, to $364 million, as the bank attracted more M&A advisory work.

The quarter contributed to a 40 per cent rise in net income for the year – to $2.1 billion – and handed its 13,500 staff an average of $321,740 in salary, compensation and other benefits for the year.

But the record compensation dished out by Lehman Brothers and Bear Stearns this year pales by comparison to Goldman Sachs.

On Tuesday, Goldman Sachs announced that it would pay its 26,400 staff an average of $622,000 in compensation this year as it announced a 70 per cent rise in profits to $9.5 billion for 2006.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive