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Goldman Sachs Q4 profits fall as compensation costs soar

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Goldman Sachs Q4 profits fall as compensation costs soar

NEW YORK – Goldman Sachs stated its fourth-quarter earnings fell by 13% from a yr earlier, largely as a result of financial institution getting ready to pay out hefty pay packages to its well-compensated workers.

It’s the newest signal that wages are growing sharply, notably on Wall Road. Many of the main banks who’ve reported their outcomes to this point have indicated plans to pay workers extra within the upcoming yr.

The New York-based funding financial institution earned a revenue of $3.94 billion, or $10.81 a share. That’s down from $4.51 billion, or $12.08 a share, in the identical interval a yr earlier. The outcomes missed analysts’ expectations, who have been in search of on common a revenue of $11.80 a share, based on FactSet.

Whereas Goldman was in a position to develop revenues within the quarter, these features have been greater than worn out by the agency’s compensation bills. The financial institution put aside $3.25 billion to cowl compensation and advantages within the quarter, up 31% from a yr earlier.

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Goldman usually has excessive compensation bills, notably within the final quarter of the yr because the financial institution prepares to pay out its annual bonuses to its workers. These bonuses can typically be a number of instances an worker’s wage, notably the agency’s best-paid merchants and funding bankers.

However rising inflation, in addition to rising competitors for workers among the many funding banks, has pushed wages considerably larger on the banks. Bloomberg Information reported late final week that the agency was getting ready to pay out particular one-time bonuses to maintain its Most worthy workers.

“It’s clear that workers are in a position to demand considerably larger pay with out essentially having to justify the rise via larger productiveness,” stated Octavio Marenzi, CEO of consulting agency Opimas LLC, in an e-mail.

Pay on the agency is tied straight into how nicely the general firm does within the yr, and this yr was extremely good for Goldman. The agency made $21.64 billion in earnings final yr, greater than double what it earned in 2020.

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Dealmaking and buying and selling remained largely sturdy final quarter for the agency, which helped drive earnings. Funding banking revenues have been 45% larger than they have been the prior yr. Buying and selling revenues have been down a modest 7%.

The agency’s return on fairness — a measurement of how nicely a financial institution performs with the belongings it holds — was 23% final yr, greater than double the place it was a yr earlier. Banks like Goldman goal for his or her return on fairness to be above 10%.

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