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Goldman bright spot in a grim bonus year
Hugo Duncan3 Dec 2007
London bankers were today braced for a grim Christmas and New Year as the large investment banks prepare bonus payments for staff.
Heavy losses from the collapse of subprime mortgages in the US have left bankers in the City and Canary Wharf nervous about their jobs and pay, while many now expect a sharp slowdown in business next year.
However, while thousands face lower bonuses than last year, Goldman Sachs was this week preparing to shower its employees with record payouts. The US bank has already set aside $16.9 billion (£8.2 billion) for the first nine months of the year to pay staff salaries, benefits and bonuses.
The pot is bigger than the whole of last year's, putting Goldman bankers on course for a bumper Christmas after the firm managed to avoid much of the mortgage meltdown. Among the big winners will be the firm's partner managing directors such as chief executive Lloyd Blankfein, who could be in line for a $75 million cash-and-stock pay package this year, and takeover specialist Simon Dingemans, who could earn more than $10 million.
Partner managing directors at Goldman earn an average base salary of $600,000, and share about 15% of the annual bonus pool. Despite the bumper payout, one insider said the bank will still trim poor performers as part of its annual cull.
CIBC World Markets analyst Meredith Whitney saidGoldman's 29,905 employees each bring in $419,629 of pre-tax income, two to three times as much as employees at rival firms. Each of Morgan Stanley's 47,713 employees this year accounted for $193,763 in pre-tax incomewhile each of Lehman's brought in $166,174.
The positive tone set by Goldman, which turned in record third-quarter profits, is unlikely to be replicated across all houses.
Headhunters predict a bumper year for M&A bankers but divisions most affected by the credit crisis, such as fixed-income trading, will see much lower payouts for all but the top staff.
Morgan Stanley, traditionally the second bank to announce bonuses, has predicted fourth-quarter writedowns of $3.7 billion, and last week parted company with co-president Zoe Cruz, a 25-year veteran.
Lehman Brothers, which like Goldman has so far emerged relatively unscathed from the credit crisis, is expected to pay on a par with last year, while Bear Stearns staff are likely to head off for their Christmas break in downbeat mood.
A survey by online recruiter eFinancialCareers.com today showed London's investment bankers are more pessimistic than their Wall Street rivals. More than 40% of bankers in London expect 2008 to be worse for business than 2007, compared with 32% in the US.
Headhunter Joslin Rowe warned the financial jobs market has dried up. Managing director Tara Ricks said: "Many of our candidates are undoubtedly staying put to collect their bonuses.
"However, announcements are likely to be lower in comparison to previous years and we would expect a strong bounce in the number of candidates keen to move to pastures greener early next year."
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A survey of more than 20,000 global financial services employees by eFinancialCareers.com reveals 40 per cent of bankers in London expect 2008 to be worse for business than 2007. Only 32 per cent of US bankers predict a deterioration next year.
However, there is more optimism in the Gulf, where a mere 12 per cent expect a downturn in 2008 and 69.3% are confident that next year will be better than this one. Hong Kong and Singapore-based bankers are also relatively upbeat, with 40 per cent and 42 per cent respectively forecasting a better 2008.
Sarah Butcher, editor of eFinancialCareers.com, said: "The relative despondency of UK bankers perhaps should come as no surprise given the recent events and the report last week that the NYSE and Nasdaq are set to raise more money via IPOs than the London Stock Exchange and AIM for the first time in three years."
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