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Goldman Sachs intends to increase bonuses for its trading division despite a decline in revenues this year, as revealed by sources familiar with the matter. The bonus pool for traders is expected to see a slight climb from the previous year, with discussions on pay ongoing at Wall Street banks, although final decisions at Goldman are yet to be made.
While the official compensation decisions remain undisclosed, a Goldman spokesperson stated, “Our compensation philosophy hasn’t changed; we’re always focused on investing in our people, especially our top performers.” This move comes after discontent arose among traders last year when bonuses were cut despite higher reported profits, resulting in several notable departures from the company.
The decision to offer higher bonuses, particularly to exceptional performers, aims to reassure Goldman’s trading staff after the redirection of significant profits in 2022 to cover losses incurred from the bank’s venture into retail banking.
Goldman’s leadership has acknowledged the necessity of rewarding top performers to prevent their departure to rival institutions, private equity entities, or hedge funds. CEO David Solomon emphasized this, stating, “The competition for top talent is still pretty intense. And so, that has an impact on how we make judgments.”
Goldman Sachs’ trading business is nearly evenly split between fixed income, currencies, commodities (Ficc), and equities. While equities trading revenues remained stable in the initial nine months of 2023, Ficc revenues saw a 16% decline compared to the previous year. Despite an overall slowdown in trading activity, specific segments like financing equity trades for hedge fund clients have experienced notable double-digit revenue growth this year.
In 2022, the trading business at Goldman Sachs thrived amidst volatile financial markets triggered by the Federal Reserve’s interest rate hikes and Russia’s actions in Ukraine. Additionally, Bank of America expressed intentions to marginally increase its bonus pool for traders compared to the previous year, while JPMorgan Chase was reported to plan maintaining a flat bonus pool for 2023, as per sources familiar with the situation.
JPMorgan and Bank of America declined to comment. Earlier details regarding trading bonuses were disclosed by Bloomberg. Furthermore, Goldman Sachs announced in October that it had allocated a larger portion of its revenues to compensate its bankers, emphasizing this move as necessary to recognize and reward top talent within the firm.
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