Goldman Sachs bonuses will not be affected by big writedowns
Last year, there was some unhappiness over the level of bonuses at Goldman Sachs. This year, after various Goldman people left for hedge funds, there have been rumblings that pay might be on the up. Today's third quarter results from the firm seem to confirm that.
In the first nine months of 2023, Goldman spent 5% more on compensation and benefits, even as its headcount fell 7% following waves of job cuts that removed 3,200 people. As a result, the ever-unpopular metric of average global pay per head for the first nine months of the year rose from $232k in 2022 to $259k in 2023. The average covers people in all Goldman's offices and divisions, but if you work for the firm, it's an indication that things are moving in the right direction.
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Compensation spending is rising despite Goldman's consumer banking troubles and writedowns. The bank said today that it's written down $506m of intangibles after it sold GreenSky to Sixth Street for around $1.2bn less than it bought it for, and that it had recorded $358m of impairments on consolidated real estate investments.
Speaking on the firm's investor call, Goldman CFO Denis Coleman said the firm needs to pay people generously as there is fierce competition for them. The recipients of this year's handsomer Goldman bonuses may well be in leveraged finance. In the first nine months of 2023, debt capital markets revenues at the firm were up 35% compared to last, while at JPMorgan and Bank of America they were down 13% and up 13% respectively. Goldman said leveraged finance activity drove the increase.
Goldman's equities salespeople and traders also outperformed rivals, although their revenues were merely flat year-on-year in the first nine months compared to declines elsewhere. The firm's fixed income traders, who are often vociferous about their pay, underperformed the market with a 16% decline in revenues over the same period and "significantly lower net revenues in currencies and commodities" in the third quarter, while macro trading at Citi boomed.
Some of the latest writedowns had already been accounted for in previous reserve provisions. In the first nine months of 2023, Goldman recorded 'just' $453m of credit losses, down from $1.7bn last year. Even so, net earnings fell 34% in the period.
Yesterday, a retrospective compensation survey said Goldman cut its London analyst (junior) bonuses that are paid in the summer by 60% in two years. Those analyst bonuses were, however, stable on 2022.
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