Goldman slashes pay on weak quarter for markets

Tim Wallace
Follow Tim
GOLDMAN Sachs slashed pay in the third quarter, the investment bank announced yesterday, as profits slid in the three-month period.

The bank saw profits slip two per cent to $1.43bn (£886m), largely as a result of weak market activity.

The fall in earnings was blamed on both the effect of the Federal Reserve considering slowing its money printing programme, and on the uncertainty caused by the government shutdown at the end of the quarter.

Investment banking revenues held flat on the year at $1.7bn, while investment management revenue increased one per cent to $1.5bn.

Assets under supervision increased by $36bn on the year to a record high of $991bn.

But market-making revenues plunged 49 per cent to $1.4bn, compared with the same period of 2012.

Expenses dropped largely thanks to falling pay levels.

Compensation and benefits expenditure dived 35 per cent to $2.4bn, from $3.7bn a year earlier.

At the same time headcount held steady at 32,600.

That means average compensation per employee fell 35 per cent to $73,067 for the quarter.

And operating expenses more broadly dropped 25 per cent on the year to $4.56bn.

“The third quarter’s results reflected a period of slow client activity,” said chairman and chief executive Lloyd Blankfein.

“As longer term US budget issues are resolved, we could see an improvement in corporate and investor sentiment that would help lay the basis for a more sustained recovery.”

For the first nine months of the year annualised return on equity came in at 10.4 per cent, against a cost of capital thought to be around 10 per cent.

On a fully loaded Basel III basis its capital ratio came in at 9.8 per cent. On a standardised basis, rather than the advanced method allowed for large banks, it came in at 9.1 per cent in the quarter.