Here's why Goldman Sachs' London staff are paid so well
As we reported last week, people who work for Goldman Sachs in London earn a lot more than people who work for Goldman Sachs the world over. They earn 40% more, to be precise: employees at London-based Goldman Sachs International earned an average of $530k per head last year; employees at Goldman Sachs globally earned an average of $379k. What makes London so lucrative?
Firstly, City-based Goldman bankers make more per head in revenues than their global counterparts: Goldman bankers in London generate an average of $1m in revenues per head every year - 4% higher than their counterparts globally.
Secondly, City-based Goldman bankers make more in profits than their global counterparts. The average London-based Goldman banker generates a profit of $291k per year - 27% higher than his/her global counterpart.
Thirdly, as the chart below shows. Goldman's London business is skewed towards investment banking (IB) sales and trading (Institutional Client Services, ICS), where staff are well paid. By comparison, a small percentage Goldman's London revenues are generated from investing and lending (I&L) and investment management (IM).
And lastly, even though 45% of Goldman's London-based staff are 'support' staff as opposed to revenue generators, the ratio of support staff to revenue generators is likely to be higher globally. At most banks it's standard for support staff to outweigh front office staff in the ratio 2:1. Low paid support staff may therefore make up a comparatively small proportion of Goldman's London people.
As Goldman splits out both revenues and headcount by division for its London-based business, it's also possible to gain a rare insight into productivity across the firm's different business areas. As the chart below shows, front office staff in sales and trading (ICS) and investing and lending (I&L) are far more productive than those in investment management. However, this revenue advantage may be mitigated by the quantities of capital and support staff required to run a successful sales and trading business.
*Figures don't include support staff allocated to each division.