Goldman profits soar on lower pay

Goldman Sachs reported fourth-quarter profits that soared above Wall Street expectations Thursday as the company scaled back how much it set side to pay its employees.

The Wall Street powerhouse, which has endured scrutiny over signs it was on track to pay billions of dollars in bonuses this year, said it earned $4.9 billion, or $8.20 a share, during the final three months of 2009. Analysts had been expecting the New York firm to end the quarter with profits of $5.20 a share.

The firm’s full-year results were also eye-popping. Annual revenues more than doubled from a year ago to $45.2 billion, falling just shy of Goldman’s record year for sales in 2007. And Goldman Sachs said it earned $13.4 billion in 2009, helped by strong results in its trading business. That was a record annual profit for the company.

But perhaps the biggest boost to earnings was a severe reduction in the money spent on paying employees of the firm.

 

Goldman Sachs said it spent $16.2 billion, or 38.5% of the firm’s total revenue, compensating employees in 2009. That marks the lowest such ratio since the firm went public in 1999.{loadposition in-article}

The move is believed to be in response to the criticism that Goldman and other big banks have endured in recent months about how much they pay their employees after being bailed out by the government a little more than a year ago.

Money spent on salaries and bonuses by Goldman were still up nearly 50% from a year ago, but off from the record levels in 2007.

If the total compensation pool were to be handed out evenly among Goldman’s employees, that would come to about $498,461 a person. In 2007, the average annual compensation per worker came to $661,400.

Goldman Sachs (GS, Fortune 500) shares gained 1% in pre-market trading.

Thursday’s results from Goldman Sachs punctuate what has been a mixed bag of earnings reports from the nation’s top financial firms.

Rival Morgan Stanley (MS, Fortune 500) managed to reverse its losses from a year ago, the company revealed Wednesday, although its results fell short of consensus estimates.

Morgan Stanley also reported a big jump in compensation expenses, but much of that was due to an increase in staff tied to a joint venture with Citigroup.

Both Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) each reported steep losses earlier this week. And while JPMorgan Chase (JPM, Fortune 500) posted a better-than expected profit last Friday, investors were concerned by cautious comments from CEO Jamie Dimonprofits that soared above Wall Street expectations Thursday as the company scaled back how much it set side to pay its employees.

The Wall Street powerhouse, which has endured scrutiny over signs it was on track to pay billions of dollars in bonuses this year, said it earned $4.9 billion, or $8.20 a share, during the final three months of 2009. Analysts had been expecting the New York firm to end the quarter with profits of $5.20 a share.

 

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