The Banking and Strategy Initiative

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Bank results week: Goldman Sachs makes 51% Margin

Goldman Sachs spent $16b on compensation in 2009 or just 35.8% of revenue to record the lowest compensation pay out on the street. Investment Banks like JP Morgan still target paying 40-5% going forward. Thus isn the Q4 ending December ’09, Lloyd Blankfein’s team earned a record $4.95 billion riding on a revenue of $9.62 billion vs $9.65 billion in the year ago quarter. Comp expense was thus down $3.4 billion to produce a great surge in profits.


Goldman also said compensation and benefits expenses were $16.19 billion in 2009, or 35.8% of net revenue. The ratio fell from 48% in 2008 to the lowest level in the company’s history, Goldman said.

The Wall Street firm, which has faced public anger over recording big profits after accepting bailout funds, said total compensation and benefits have decreased by $4 billion, or 20%, since 2007.

In the fourth quarter, compensation was reduced by $500 million to fund a charitable contribution, Goldman said Thursday.

Total underwriting fees at the investment bank climbed to $962 million from $460 million a year earlier.

“Despite significant economic headwinds, we are seeing signs of growth and remain focused on supporting that growth by helping companies raise capital and manage their risks, by providing liquidity to markets and investing for our clients,” Chief Executive Lloyd Blankfein said in a press release.


The bank’s earnings of $8.20 a share easily topped analysts’ expectations of $5.20 a share and compared with a loss of $2.12 billion, or $4.97 a share, in the quarter a year earlier.

Mr. Viniar said Goldman’s business through 2009 had been bolstered by its strong trading activities — helping companies and governments hedge interest rates or deal in currencies. This activity dropped off in the final quarter, he said, but its revenues were helped by strong investment banking activities, like equity and debt underwriting, in the fourth quarter. The dramatic slowdown in trading, however, had already begun to reverse itself in 2010, he said.

On average, each Goldman employee is set to receive about $498,000 in bonus and compensation for 2009, an amount that could still incense the bank’s critics, given the economic pain elsewhere in the country.

CFO David Viniar is reported to have spent the entire earnings conference delineating on how Goldman Sachs is  showing “restraint” in its pay policies and how the government monies helped them turn the tide on 2008 and 2009


This entry was posted on January 22, 2010 by in TARP, Uncategorized, US and tagged , , , , , , , , , , .


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