Profits up in bumper year for Goldman

Steve Dinneen
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Goldman Sachs’ profit for 2009 jumped more than five-fold to $13.4bn (£8.28bn), the bank revealed yesterday.
The result, up from $2.32bn last year, was buoyed by the bank’s vastly reduced compensation pool, down from an expected $22bn to $16bn.
It reported net revenues of $45.2bn and net earnings of $13.4bn for the year ending 31 December. Return on average common shareholder equity was 22.5 per cent. Diluted earnings per common share were $22.13 compared with just $4.47 the previous year.

Fourth quarter net revenues were $9.62bn and net earnings were $4.95bn. Diluted earnings per common share were $8.20 compared with a loss of $4.97 for the fourth quarter the year prior. The earnings per share were also well up from the $5.25 posted in the bank’s third quarter results.

The bank raked in a staggering $36m a day as bullish traders took full advantage of the rallying markets. It incurred $6.44bn of corporate taxes, resulting in an effective tax rate of 32.5 per cent. Goldman’s revenue was in line with expectations but earnings rocketed on the back of the bank’s reduced bonus pool.
The ratio of compensation to revenue plummeted from 48 per cent in 2008 to 35.8 per cent. The percentage of revenue given over to pay and bonuses was the lowest since the company went public in 1999.
While net revenues in 2009 were only two per cent lower than the firm’s record net revenues in 2007, total compensation and benefits were 20 per cent down – a reduction of $4bn. The most successful bank in Wall Street history was among the first to pay back Tarp bailout funds to the US government. It repaid $10bn in June, with an additional $318m in dividends and $1.1bn to repurchase the warrant, giving a total of $1.42bn back to the taxpayer.

GOLDMAN Sachs will pay its staff $16bn (£10bn) in pay and bonuses – well below the expected amount. UK bankers will absorb a relatively large proportion of the 50 per cent levy on UK bonuses, but it will be partially cushioned by Goldman dipping into the global pool. The way the pool will be split between staff has not been revealed. Goldman attempted to ease public anger over the bumper payout by skimming $500m from the pay of their 400 senior partners to donate to the bank's charitable arm, Goldman Sachs Gives.