This chart from J.P. Morgan explains why pay is highest at Goldman Sachs

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Just before J.P. Morgan announced its fourth quarter results today, J.P. Morgan's banking analysts followed in the footsteps of Morgan Stanley and Barclays with their appraisal of what's coming up in 2015.

Many of their conclusions are similar to Morgan Stanley's - for example, J.P,'s analysts think that UBS is the best bank to work for in Europe. They also think that European banks need to engage in some serious cost-cutting and that litigation is a risk for the year ahead. Unlike Morgan Stanley's analysts, they think that Deutsche Bank is well-positioned to withstand litigation and that the German's fixed income currency and commodities (FICC) business is viable without additional cost cutting.

What really caught our attention, however, were the bottom three rows of the chart below. If you're wondering why Goldman Sachs pays its employees so well, they go a long way to explaining why. - By 2016, JPMorgan predicts that revenue per head at Goldman Sachs will be 50% higher than the average.

Goldman employees are actually expected to garner a comparatively small proportion of this higher productivity for themselves. In 2016, J.P. Morgan predicts that only 37% of Goldman's revenues per head will go to its employees, compared to an industry average of 41.2%. Goldman's abnormally low compensation ratio may reflect its comparatively high non-compensation costs, themselves a likely result of its heavy investment in technology. Yes, Goldman Sachs bankers are more productive than the rest, but that's partly down to the infrastructure provided by their employer.

JPMorgan chart

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