Goldman Sachs is keeping a tight grip on bonuses as costs rise
It's unlikely to be a vintage year for bonuses at Goldman Sachs. The firm released its third quarter results today, and there's little sign of the sort of third quarter bonus bump that might indicate an unusually generous compensation pot.
Goldman's spending on compensation (salaries, plus accrued bonuses) rose 14% year-on-year in the third quarter, which would look generous were it not for the fact that headcount was also up by 14% during the year. And for the year so far, spending on compensation is down by 21%, even though Goldman has 6,100 more people than before.
As a result, the average Goldman employee has accrued compensation of 'just' $232k so far for 2022, down from $337k in 2021, a fall of 31%.
While part of the fall in pay per head might be attributed to Goldman's acquisition of fintech lender GreenSky, where pay likely lower than in sales and trading or banking, GS also has good reason to be cautious.
Investment banking revenues have collapsed. Revenues from Goldman's combined M&A, ECM and DCM activities fell 57% year-on-year in the third quarter; they're down 45% year-to-date.
On the other hand, though, Goldman's fixed income salespeople and traders are having a great year, with FICC revenues up 36% year to date, compared to 21% at Morgan Stanley and just 10% at JPMorgan. Within fixed income, Goldman said the best performers were rates and currencies desks, where revenues were "significantly higher", followed by commodities and credit products, where revenues were merely "higher." In mortgage trading, though, revenues were "significantly lower."
Fixed income traders might be paid enough to keep them happy, but Goldman won't want to be too splashy. In the first nine months, costs across the firm consumed 63% of revenues, up from 53% last year. Even while compensation spending was crimped, technology spending rose 16% and spending on professional services (eg. management consultants to help shape strategy) rose 22%.
Most notably, there were signs of potential pain to come, with provisions for credit losses at $1.7bn this year, up from a non-material level in 2021.
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