Huge Goldman Sachs pay pool could enrich Treasury by £2bn
Huge Goldman Sachs pay pool could enrich Treasury by £2bn
The Chancellor stands to receive £2 billion of Goldman Sachs’s record-breaking compensation pool if the Wall Street bank continues its winning streak (see Commentary, facing page).
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David Viniar, the chief financial officer, said yesterday that, barring “some disaster” in the fourth quarter, he expected to pay the staff more than the $10.9 billion they shared last year after profits were hit hard by the credit crunch.
A spokesman said that Goldman Sachs and its British bankers would hand over about £2 billion in corporate and personal tax for 2009 if the bank continued accruing compensation at the present rate. This is equivalent to tax payments of £370,700 for each of Goldman Sachs’s 5,500 London-based workers.
With a return to strong profits this year, the bank had been putting aside almost half of its revenues to pay salaries, benefits and bonuses to its 30,700 staff, building its compensation pool to $16.7 billion by the end of the third quarter.
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The prospect of a $544,364 (£335,000) average payout for staff, with still another quarter in which to earn before the end of the year, has infuriated lawmakers and taxpayers, who gave the bank $10 billion at the height of the financial meltdown.
However, Mr Viniar insisted that Goldman Sachs was conscious of the hardship the recession was causing for people outside Wall Street. He said: “We’re very focused on what’s going on in the world, what’s going on in the economic environment.
“But we’re also focused on our franchise and being fair to our people, who we think have performed admirably through the entire crisis. That’s something we’re weighing up.”
Mr Viniar said that the bank was considering whether to raise the proportion of its compensation paid in equity, as other banks have done in response to pressure to tie bonuses better to banks’ performances.
“We’ve always paid a lot of our bonuses in stock, deferred and divesting over time, but we’re looking at those programmes and a decision will be made at the end of the year,” he said. Goldman Sachs reported a higher-than-expected net profit of almost $3.2 billion for the third quarter. It poured $5.3 billion into its compensation pool, up 46 per cent on the comparable quarter last year.
Although less than the $6.6 billion put away in the second quarter, the bank’s third-quarter compensation allocation still puts the bank on track to beat its 2007 record compensation pool of about $21 billion. Lloyd Blankfein, the chief executive of Goldman Sachs, said that business conditions were improving.
Net revenue was 105 per cent higher than last year at $12.3 billion. Revenue fell in investment banking by 31 per cent year on year to $889 million as clients held off on making acquisitions. Revenue from trading and principal investments, which includes trading done with the bank’s own funds, soared by more than 260 per cent to $8.8 billion as fixed income and equities performed strongly. Shares in Goldman Sachs closed at $188.63, down $3.65, or 1.9 per cent.
Lord Mandelson, the Business Secretary, warned last night that the City was witnessing an “unacceptable return” to past practices on bonuses.
He said that the Financial Services Authority could force banks to increase their capital ratios if they were deemed to have handed out excessive rewards to high-earning staff.
Resource : business.timesonline.co.uk