Something bad seems to have happened to pay at Goldman in London last year. Long renowned for paying its average London member of staff twice as much as its average employee globally, Goldman may finally have decided to address the discrepancy. However, even with the pay cut, Goldman still pays its investment bankers in London one third (33%) more on average than it pays investment bankers in the U.S. and anywhere else in the world.
Total compensation costs in London, including social security costs and pensions, fell from $5.34bn in 2010 to $1.15 billion last year, with ‘aggregate gross wages and salaries’ taking a massive hit. Pay figures were obscured by a $1.8 billion pay credit for the year ending December 2011 and a $455 million charge for the year ending December 2010.
If you take the staff costs and work them out on an average pay per head which is standard, excluding the MTM on unvested equity, it works out at a decline of 27% which is in line with the global decline in compensation and in line with the messaging we gave around comp that it would fall more than the global revenues which fell at 26%.
Goldman Sachs has been reducing salaries for its London-based Managing Directors and Vice Presidents. This may have something to do with the painful reduction. Nevertheless, average compensation spending per head in London was still $488,000 last year. Across Goldman as a whole it was $367,000.
Goldman is also hiring
Figures for September are out from the ever-illuminating IMAS consulting. They show changes to the number of FSA-registered employees per bank over the past month. In September, it looks like the greatest number of staff were added at Goldman Sachs International – Goldman’s London-based European business.
Goldman added 42 people in Europe last month according to IMAS. It was followed by Credit Suisse Securities (34 people) and Credit Suisse International (37 people – there may be some overlap here). Merrill Lynch International added 20. RBC and RBC Europe added 15 (again, some overlap seems likely).
Goldman Sachs International has also recently issued its annual results for the year to 31st December 2011. They reveal that the company increased its profits by a massive 212% last year, to $2.4 billion, up from $775 million in the year ended December 2010.
Goldman has also been hiring – particularly in the support functions areas, where 184 people were hired in the year ending last December and headcount increased 7%. In IBD, 49 people were hired last year and headcount rose 8.5%. In Institutional Client Services (sales and trading), 13 people were added – less than 1%. The ratio of front to back office staff across Goldman Sachs International is approximately 1:1. This is low compared to other banks, where the average is generally 2:1.