The outlook for compensation at Goldman Sachs has taken another turn for the worse.
In the three months to June 2022, Goldman cut spending on compensation by 30% compared to one year earlier. Over the same period, headcount was up 15%.
As a result, average compensation per head at Goldman Sachs fell 34% in the second quarter to $84k, down from $129k in the same period of 2021.
The decline can be partly attributed to Goldman’s focus on shifting staff to low-cost locations, where pay is lower, and to the expansion of its consumer banking arm, where people earn less. But it also almost certainly reflects lower bonus accruals in areas like the investment banking division, where revenues have plummeted across the industry.
As the chart below shows, Goldman’s fixed income currencies and commodities (FICC) salespeople and traders did comparatively better than rivals in the second quarter relative to a year earlier, and its equity capital markets bankers did comparatively worse. Within FICC, the firm said it recorded, “significantly higher net revenues in interest rate products, commodities and currencies, partially offset by significantly lower net revenues in mortgages and credit products.” Citi said it experienced something similar when it reported on Friday.
Goldman fixed income traders’ best efforts appear to have been partly undone by the firm’s investing arm, though. In the second quarter, revenues in Goldman’s asset management division declined 79%.
Goldman’s asset management division includes its private equity business and its debt investing business. Both areas registered large market to market losses in the second quarter. In equities, Goldman said there were “significant mark-to-market net losses from investments in public equities and significantly lower net gains from investments in private equities,” with the result that revenues from equity investments were a negative $221m. Revenues from lending and debt investments fell 77% to $137m.
As revenues declined in other business lines, Goldman’s reliance on its fixed income traders increased in the second quarter: they generated 30% of revenues, up from 15% in Q2 2021.
In the first half of 2022 as a whole, Goldman Sachs accrued $165k in compensation per head, down 40% on the $277k it accrued in the first six months of last year. The firm is therefore on track to pay an average of $330k to each employee.
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