Goldman Sachs profits halved but pay and bonuses top $12bn

The group yesterday revealed a total compensation package, including salary and bonuses, of $12.2 billion (£7.9bn) for 2011.

Based on a headcount of 33,300, which includes some 5,300 staff in the UK, the total equates to an average of more than $367,000 each. It is likely that senior bankers will be entitled to bonuses in the millions of dollars.

Although the pay-out is down by 21 per cent on 2010, it is sure to spark fresh anger over banking remuneration.

The figures are the latest in the annual results season for the big US banks and will be watched closely on these shores as UK peers prepare to release their own figures next month.

David Hillman, spokesperson for the UK-based Robin Hood Tax campaign, said: “When even in a bad year each Goldman employee pockets an average of $367,000 – nearly ten times the average UK salary – it’s proof that banks live in a parallel universe to the rest of us.”

Goldman posted a 47 per cent drop in net profits to $4.4bn for the year to 31 December. This followed a 26 per cent decline in revenues to $28.8bn. Profits more than halved in the final three months of the year.

The results reflect the weakest year for Wall Street since the 2008 financial crisis. Market volatility and the fallout from Europe’s raging debt crisis saw many clients pull back on risk-taking and delay stock market flotations and share raisings.

Banks slashed tens of thousands of jobs and drained bonus pools to respond to the slowdown in business throughout 2011.

Goldman’s staffing levels fell by 2,400 during the year, reflecting job cuts across trading, banking and back-office operations. The share of revenues paid out in salary and benefits for 2011 was up from 39.3 per cent to 42.4 per cent.

Chairman and chief executive Lloyd Blankfein said: “This past year was dominated by global macro-economic concerns which significantly affected our clients’ risk tolerance and willingness to transact.”

Each of Goldman’s business areas – investment banking, trading, investment management and investing and lending – reported double-digit revenue declines during the fourth quarter. All but investment management reported lower revenue for the full year.

Return on equity, a key measure of profitability, was just 3.7 per cent for 2011. In the years leading up to the financial crisis, the bank could boast returns in excess of 30 per cent.

Jack Kaplan, portfolio manager at Carret Asset Management, said: “They did a decent job on the cost side, but at the end of the day I think Goldman is becoming more and more difficult to analyse.

“You can no longer count on all the different groups to be doing well at the same time. It looks like nothing’s working right now. They were below expectations on virtually everything on the revenue side.”

Goldman took $10bn from the US Treasury at the height of the financial crisis but has since paid the money back, with taxpayers earning some $1.4bn on the investment.

Rival Morgan Stanley was due to report its results today.

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