Goldman Sachs cuts bonus pot - to 'just' £2.5bn for three months

Published on Monday 19 July 2010 22:18

GOLDMAN Sachs, Wall Street's dominant investment bank, set aside $3.8 billion (£2.5bn) for pay and bonuses for the second quarter - equivalent to £105,000 for every employee - despite seeing net profits slashed by more than 80 per cent.

The bank also paid 395m under the UK's one-off bonus tax scheme for windfalls handed out earlier this year.

Second-quarter remuneration costs means 34,100 workers - including 5,500 staff in the UK - are now in line for an average 179,000 each so far this year. Goldman set aside 3.6bn for pay and bonuses in the first three months of the year.

But the Q2 total was almost half the figure paid in the same period last year.

Revenue at the bank fell to 4.3bn in the three months to the end of June from 6.8bn a year earlier, with net income of 298m against 1.79bn.

The firm's results were hampered by weaknesses in its trading and investment banking divisions. Goldman historically has had strong revenue from its fixed income, currency and commodities trading business but those revenues slipped amid market volatility in the second quarter. The bank's corporate customers were also issuing fewer bonds and shares which affected its investment banking business during the quarter.

Walter Todd, portfolio manager with analyst Greenwood Capital Associates, said: "It's a pretty significant slowdown in their overall business. We've grown accustomed to Goldman bucking the trends but this quarter it seems like maybe they're more susceptible to broader industry issues. Maybe Superman is turning into Clark Kent."

Goldman also faces the prospect of legal action by Royal Bank of Scotland after last week's Securities and Exchange Commission settlement which saw it ordered to pay $100m in compensation to the Edinburgh-based bank.

RBS has said it is considering all its options including possible civil action to recover hundreds of millions of dollars it lost by insuring a sub-prime mortgage-backed securities issued by Goldman.