Even with this ray of compensation sunshine, clouds are still on the horizon. To reach the 10% raise, financial newsweekly The Deal, estimates individuals will have to increase their productivity at least by 50%. This is due to investment houses increasing performance-based compensation and paying smaller base salaries.

But if investment bank employees can muster the necessary productivity increases, raises could come across the board. Financial analysts will have the potential to earn between $100,000 and $150,000, while managing directors at the top will make up to $1 million this year.

Additionally, The Deal survey found smaller investment banks with intrinsically lower overhead are now paying their top-producers just as much as the big firms. Thus, all down the Street, firms are trying to hold onto their remaining employees, signaling a dramatic decline in layoffs though 2004.

“We lack hard numbers to prove that M&A is back, but anecdotally we hear that boards and CEOs are beginning to recover from the multiple shocks of the post-bubble era. While most banks have shored up business in other areas, they can’t thrive without M&A. Coupled with this trend, we’ve seen the first evidence that Wall Street is hiring again-or at least no longer cutting,” said The Deal’s editor-in-chief Robert Teitelman.