Investment Banking

Goldman Workers Feel Pinch of Digital Shift

The bank set aside 35% of its revenue for staff compensation and benefits so far this year, the lowest since at least 2009.
Matthew HellerOctober 17, 2019

As Goldman Sachs has shifted away from its legacy trading business toward a digital future, it is now paying its average employee half as much as it did 10 years ago.

According to a CNBC analysis of Goldman data, the bank set aside 35% of its revenue for staff compensation and benefits so far this year, the lowest since at least 2009.

Dividing Goldman compensation pool by its 37,800 workers, the average employee earned $246,216 for the first nine months of 2019, less than half the $527,192 at the same point in 2009.

David Solomon, CEO of Goldman Sachs

“As we grow more platform-driven businesses, we expect compensation to decline as a proportion of total operating expenses,” CFO Stephen Scherr told analysts on Tuesday. “Platform businesses should carry higher marginal margins at scale and be less reliant on compensation.”

As eFinancialCareers reports, “Historically speaking, Goldman Sachs has set the standard for compensation among large Wall Street investment banks” but “is currently undergoing a bit of a facelift as it seeks to diversify its revenue streams and rely less on what has been its bread-and-butter: sales and trading.”

In the first quarter of this year, Goldman’s compensation and benefits costs fell to $3.3 billion from $4.1 billion a year earlier.

“We are in the midst of the biggest marriage of tech and finance in history,” Mike Mayo, a bank analyst at Wells Fargo, told CNBC. “It means more bots relative to bankers, more machines, more automation, more scale. The next decade will see the implementation of technology to a greater extent and in ways that have never been done before.”

Goldman has spent $450 million so far this year on attracting new customers, including the launch of the Apple Card, the expansion of its Marcus retail banking brand, and the creation of a payments platform for corporate clients. It also committed $100 million to overhaul its stock trading technology to serve sophisticated quants who rely on trading systems over human operators.

“With the bank facing pressure on its overall returns and skepticism over its transformation, the money has to come from somewhere,” CNBC noted.


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