Fury over Goldman's £3.5bn pay and bonus payouts

Published on Tuesday 20 April 2010 21:03

GOLDMAN Sachs, the under-fire investment bank, yesterday risked a further public backlash after announcing a pay and bonus pot of $5.49 billion (£3.56bn) as it posted a steep hike in profits for the first three months of the year.

• Picture: Getty

Goldman, which is now the subject of a UK regulatory investigation in the wake of US fraud claims, said the proportion of income allocated to pay and benefits was 43 per cent – its lowest ever for the quarter.

The bank, which employs 5,500 in Britain, said its performance in the first quarter of this year reflected "more signs of growth" in the economy.

The firm's results were well ahead of expectations, with a 91 per cent increase in profits compared with the first quarter last year.

But the figure was 30 per cent lower than the bumper $4.9bn (3.2bn) profits seen in the final three months of last year. Revenues were up 36 per cent on 2009 at $12.8bn.

The results follow a decision by the Financial Services Authority (FSA) to launch a "formal enforcement investigation" into Goldman in relation to Securities and Exchange Commission (SEC) allegations.

US regulators have started a civil lawsuit against the investment bank, alleging that Goldman failed to disclose that one of its clients helped create – and then bet against – subprime mortgage securities that Goldman sold to investors. It claimed investors – including the Royal Bank of Scotland – lost $1bn (650 million) as a result of the alleged fraud, which Goldman has vigorously denied.

Goldman chief executive Lloyd Blankfein said: "In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people."

Goldman's share price took a hammering after the claims were revealed on Friday, losing 12 per cent at one point.

The fraud claims and bumper payouts have entered the political sphere in the UK, with Prime Minister Gordon Brown calling for a "special investigation" into the bank and accusing it of "moral bankruptcy".

The banker at the centre of the fraud claims, Fabrice Tourre, is reportedly set to share in the bonus pool. Staff at the bank, which paid out $16.2bn (10bn) to staff last year, will not receive the latest bonanza until next year.

Goldman said its compensation pot includes salaries, estimated end-of-year discretionary payouts, benefits and other payroll-related expenses.

"Goldman's numbers are pretty good," said David Morrison, market strategist for GFT Global Markets, "but news that the FSA is also probing the firm takes some of the shine off."

&#149 Five bids, including four from private equity firms, will go to the second round of the 2.5bn auction for Royal Bank of Scotland's payment processing business, Global Merchant Services. Canada's biggest card payment processor, Moneris Solutions, buyout firms CVC, joint suitors Advent International and Bain Capital, TPG and Warburg Pincus make up the bidding group, according to sources.