Goldman: A Mediocre Trading House That Doesn't Even Pay Very Much

The discussion continues regarding yesterday’s mediocre earnings from Goldman Sachs (GS).

Felix Salmon declared that the bank is now looking “human” and that it’s “not special any more,” and that if there were a few more quarters like this its ability to attract the best and the brightest may begin to diminish.

And here’s another reason prospective traders and bankers may not want to work there: it’s paying less than it used to, as BreakingViews notes:

For a second quarter in a row, the investment bank’s pay ratio was 43 per cent of revenue; in the past, Goldman paid out around 50 per cent to staff. For ordinary mortals, the numbers are still staggering: on an annualized basis, $545,000 is being set aside for each of the firm’s employees. But it does look like Goldman might finally be listening to its critics.

At the end of what was a blowout first quarter, it was unclear how to interpret Goldman’s relative parsimony. The bumper results meant Goldman could still accrue huge sums for employees despite the lower-than-normal percentage rate. One senior executive said then that it would be reasonable to increase the accrual ratio only if trading in subsequent quarters was poor. Well, the second quarter was rotten. But the ratio didn’t budge.

The question is: is the lower the ratio an attempt to combat image problems, because if so, it means you’re seeing employees take a real penalty from all the Goldmanfreude, and thus it represents a concrete reason to go somewhere else. If it’s just temporary, then, well, all this talk about Goldman being “human” could be temporary as well.

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