Friday, February 3, 2023

“We’ve been told the bonus pool is down 30%”

Date:

So Goldman Sachs’ markets bonuses may be down. Bloomberg reported today that salespeople and traders at the bank have been informed that the markets compensation pool will be down by a ‘low double digit percentage.’ Insiders at the bank tell us this understates the reality.

“Three managing directors have told me that the bonus pool is down 30%,” says one senior vice president in New York. “The MDs are tremendously upset. They don’t know how to communicate this.”

Goldman declined to comment on the size of its markets bonus pool. Discussions at this stage are preliminary and the markets bonus pool may well rise (or at least fall by less) from this starting-point. 

As we noted earlier, the allegedly huge cuts to markets bonuses come after traders at Goldman have had an excellent year. The firm made profits of $100m on more than 85 trading days in the first nine months. 

Insiders say several desks in particular have been enormously profitable. In the investment grade credit and derivatives business is understood to have made $350m this year, while program and algorithmic trading have made a similar amount. Equally, the commodities trading business is understood to be having another exceptional year. 

If bonuses fall by 30% despite this performance, it will be because revenues in the investment banking division have collapsed. Equity capital markets, debt capital markets and M&A revenues at Goldman were down 84%, 40% and 18% respectively year-on-year in the first nine months, compounding big losses in the consumer business and new platforms division. Traders have kept the firm afloat.

While Goldman pays on a one firm basis, and rewards according to overall rather than individual performance, individual traders still expect to get paid. If they aren’t paid, they claim they’ll leave. “It’s a matter of pride,” said one who claims the “Street is alive with bids” and that he’s already lined up two interviews for jobs elsewhere. “If you stay, you’re showing that they can treat you badly and you’ll just take it,” he adds. 

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Photo: eFinancialCareers/Dall-e

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