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Goldman Sachs pay lower bonuses as profits halve in 2011

Thursday, 19 January 2012 10:39 AM

Goldman Sachs has cut pay and bonus payments relating to last year’s trading by around 20 per cent from the level of 2010.

The total level of pay and bonuses will be £7.4 billion. However, the cut in pay and bonuses is dwarfed by the reduction in profits for the year and overall Goldman Sachs is paying a higher proportion of its profit in remuneration.

The average total compensation for a member of Goldman Sachs staff in 2011 will be $366,360. This is a decrease of 14.7 per cent on 2010. The bank cut staff levels by seven per cent in 2011.

For the whole of 2011, Goldman Sachs made 47 per cent less profit in 2011 than in 2010 and the outlook is gloomy as the bank’s net income dropped by 58 per cent to $1.01 billion in the final three months of 2011. Pre-tax profits for the year were $6.2 billion.

Returns on equity for shareholders in 2011 were at their lowest level for more than ten years at just 3.7 per cent, less than the cost of capital. The bank blamed the euro debt crisis and weak economic growth in the United States.

Goldman chief executive Lloyd Blankfein said: “This past year was dominated by global macro-economic concerns which significantly affected our clients' risk tolerance and willingness to transact."

The banks also reported that the UK bank payroll tax – introduced by the Labour government for one year in 2010 – cost them $465 in 2010. The tax was at 50 per cent on bankers’ bonuses.

In 2009, Mr Blankfein was asked by a reporter if there should be limits on compensation to bankers, to which he replied, “I don’t want to put a cap on their ambition. It’s hard for me to argue for a cap on their compensation,” before going on to say that he was “just doing god’s work.”

Rival US bankers Citigroup reported a profit of $11.3bn for 2011, up six per cent on the previous year. Meanwhile, JP Morgan reported a drop in profits of $3.7 billion in the final quarter of 2011, a fall in profits of around 20 per cent compared to last year.

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