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Goldman Controlling, Not Cutting, Compensation Expenses

Pre-beard days

Banks are cutting operating expenses – particularly compensation costs – at every turn; firms that rely on investment banking revenue can’t survive. These are two prevailing principles on Wall Street that were disproven, to a degree, by Goldman Sachs on Tuesday.

Goldman reported a better-than-expected first quarter, driven by a 36% uptick in investment banking revenue, making up for the firm’s lackluster trading results. Goldman topped rival J.P. Morgan’s investment banking revenue totals for the first time in five years.

Meanwhile, the firm’s compensation ratio – pay and benefits costs compared to net revenues – fell less the one percentage point, despite all the rhetoric surrounding cost-cutting.

Goldman employs just 400 fewer workers than it did at this time last year, a tiny number compared to other large global banks. Staffers are on pace to make roughly the same as last year – around $136,000 on average. It’s clear Goldman is controlling costs, not cutting them.

Still, Chief Executive Lloyd Blankfein’s tone was cautious, if not somber, similar to that of Citi CEO Michael Corbat, whose firm unveiled strong investment banking numbers earlier this week. Many Wall Street CEOs appear to share the same philosophy: bragging to the public does little good in today’s environment.

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Being unemployable doesn’t happen overnight. It can even creep up on you while you’re still working. These are the signs that the scourge of unemployability is coming to you.

SAC Waiting on Citi (BBW)

A U.S. district judge conditionally approved SAC Capital’s record-setting $602 million settlement with the Securities and Exchange Commission. The deal can only go through in its present form – with SAC neither admitting nor denying guilt – pending the results of an appeals court decision involving Citigroup.

Bonus Caps Approved (NY Times)

It’s official. The European Union passed rules that will cap banker bonuses at 100% of annual salary, or twice that number with the approval of shareholders. The new rules will go into effect next year.

Lighter Sentence (Bloomberg)

Former MF Global broker Evan Brent Dooley, who pleaded guilty to making unlawful trades that cost the firm $141 million, was sentenced to five years in prison on Tuesday. Prosecutors wanted 10 years.

‘Cocaine, Obviously, Helps’ (NPR)

How do investment bankers working 100-hour weeks remain normal? “One obvious answer to that is that they probably can't,” says one former Goldmanite.

M&A Set to Take Off? (WSJ)

The M&A world was fairly quiet in March, but optimism remains high, at least at J.P. Morgan, the U.S. bank sitting atop the M&A league table. Chris Ventresca, the head of the J.P. Morgan's M&A group, sees lots of deals happening in 2013.

BlackRock Heats Up (Financial Times)

U.S. asset management giant BlackRock booked a strong first quarter, easily beating estimates with a 10% surge in profit. The New York firm is hiring, too.

Buzz Around the Office

Heart of Boston (Business Insider)

Monday’s terror attack during the Boston Marathon showcased the hate this world has to offer. The actions of first responders – who ran directly toward the carnage – highlight all the good. Here are 13 examples.

List of the Day: Career Lessons

Below are three career lessons, often learned the hard way through years of experience.

  1. Your coworkers are just as scared as you.
  2. Sell yourself harder than you think you should.
  3. Shut up and listen.

(Source: Business Insider)

AUTHORBeecher Tuttle US Editor

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