If Goldman Sachs' spending on compensation is anything to go by, its junior investment bankers are in for a dramatic increase in bonuses when they're announced in August.
Goldman released its results for the second quarter of 2021 today. They reveal a 47% increase in spending on compensation and benefits in the first half of this year compared to last, even though headcount was up only 4.3% over the same period.
Goldman's overworked investment bankers are likely to be the key beneficiaries. In today's results, Goldman said its investment bankers generated their second-highest quarterly net revenues ever in the second quarter, with only the first quarter's revenues being higher. Year-on-year, revenues in Goldman's M&A business were up 62% in the first half, while ECM revenues were up 96%. Debt capital markets revenues were up a mere 16%.
Goldman's salespeople and traders performed less impressively compared to last year's record results: fixed income currencies and commodities revenues were down 14% in the first half; equities revenues were up 16%.
Unlike most rival banks, Goldman hasn't hiked salaries for its junior investment bankers in the face of complaints about long working hours. Instead, the firm has preferred to indicate that it will hike August analyst bonuses and reward 100-hour weeks with increased per annum total compensation (PATC) rather than higher fixed pay.
In the first half of 2021, average accrued compensation per head at Goldman Sachs was $277k, up from $197k in the first six months of last year.
Goldman said today that the pipeline of investment banking deals at the end of the second quarter was up significantly on the end of 2020 and the end of the first quarter of 2021, suggesting it will also need to pay well to retain juniors to work on forthcoming deals.
JPMorgan also reported its second quarter results today. Compensation spending in its corporate and investment bank fell 10% year-on-year in the second quarter and was up just 13% in the first half.
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