Employees hit a jackpot as Goldman profits surge
Goldman Sachs Group is paying its employees an average of $622,000 this year, after posting the highest profit ever for a securities firm.
By Agencies |
LONDON: Goldman Sachs Group is paying its employees an average of $622,000 this year, after posting the highest profit ever for a securities firm.
The firm set aside $16.5 billion for salaries, bonuses and benefits for its 26,467 employees in the fiscal year ending in November, 40% more than it paid out all of last year, according to Goldman’s earnings report. The firm allocated 43.7% of its revenue for pay, down from 46.6%.
Investment banks benefited this year from rising stock and commodities markets and record share sales and takeovers. Goldman said today full-year profit jumped 70% to $9.54 billion, more than the top five firms earned in both 2001 and 2002. Average pay is skewed by the highest earners.
“Everyone who has that big smile when they get their check will also realise that it may not be nearly the same amount next year,” said Henry Higdon, who runs New York-based executive recruitment company Higdon Partners. A handful of star bankers and traders will get bonuses worth more than $30 million this year, he said. “The stars don’t align very often.”
Goldman reported gains of more than 50% each in investment banking and fixed-income and equities trading. The biggest raises may go to bankers who arrange share sales after revenue for their division almost doubled. The decline in the compensation-to-revenue ratio was “a direct result of our financial performance this year, not necessarily a permanent shift to a lower comp ratio”, CFO David Viniar said on a conference call with journalists Wednesday.
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The greatest growth in hiring this year was in Asia, followed by Europe and the US, Mr Viniar said. Goldman’s pay per employee in 2005 was the highest of the major New York-based securities firms. It is the first to report fourth-quarter earnings this year. Bonuses may peak this year as record profit and a backlog of transactions give way to slower earnings growth, according to an annual survey of European compensation released last month by London recruitment firm Armstrong International.
Pay will rise as much as 30% this year for mergers advisers, private bankers and derivatives and commodities traders, Armstrong found.
Bonuses for debt underwriters will climb less than 10%. Underperformers may get no raise as banks focus on rewarding stars in case markets go sour. In the US, Wall Street employees last year earned $289,664 on average, or 5.1 times as much as other workers in New York City, New York State Comptroller Alan Hevesi said in October.
Financial employees generated $2.1 billion in 2005 tax revenue and each new position filled in the industry creates two additional jobs in the city and one in the suburbs.
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