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Goldman Sachs and Co.: Big US banks pay $142 billion in bonuses and salaries

2022-01-21T06:43:45.554Z

Warm rain of money for the bankers of Goldman Sachs and Co: The institutes paid out up to 22 percent more in 2021. This is also a sign of the fierce competition for talent and top performers. Shareholders worry about rising costs.



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Banking center in New York

: On Wall Street, the largest banks opened their coffers for bonuses and salaries very wide last year

Photo: A2800 epa Peter Foley/ dpa

Even though most of the big US banks were able to increase their profits for the year as a whole, they largely failed to meet market expectations in the past quarter. While mergers and IPOs brought plenty of cash into their coffers, trading earnings fell in the face of quieter markets. In the battle for talent and top performers, Wall Street giants also spent significantly more money on salaries and bonuses, which weighs on their balance sheets and increasingly worries investors.

JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley and Bank of America paid a whopping 142 billion US dollars to their employees - that's an increase of 15 percent compared to the previous year, as the "Financial Times" has calculated.

Salary experts expect salaries to continue to rise, especially in investment banking.

"It's just a competition for talent. You can't automate an M&A transaction," says Barclays banking analyst Jason Goldberg, who understands the rising costs.

"It's just a competition for talent. You can't automate an M&A transaction"

Jason Goldberg

, Barclays analyst

Above all, the US bank Goldman Sachs, which earns its money primarily in investment banking and securities trading, raised salaries particularly sharply. According to FT calculations, the average bank employee took home just over $400,000 last year, up 22.8 percent from the previous year. According to the Wall Street Journal, rival Morgan Stanley spent $24.6 billion on salaries, up 18 percent year-on-year.

At the same time, banks are currently having to make higher investments in new technologies and modernize existing IT systems in order not to fall behind in the competition with significantly cheaper neobanks.

These fintechs with a banking license are attracting more and more investors to their side and are expanding their range of financial services beyond simple custody accounts.

Market observers justify the recent price setbacks at US banks after their quarterly reports with investors' concerns about rising costs and salaries at the institutes.

Investors worried about rising costs

The income from Wall Street houses still seems to cover the hefty salaries: Goldman Sachs employees received around 30 cents of every dollar the bank earned last year, and at Morgan Stanley it was even 41 cents.

JPMorgan, in turn, put 25 cents of every dollar of revenue into employee compensation pots, the FT reports.

JPMorgan boss

Jamie Dimon

(65) assured that salaries would remain competitive

recently.

"And if that squeezes margins for shareholders a little bit, then so be it."

"And if that squeezes margins for shareholders a little, then so be it."

JP Morgan CEO

Jamie Dimon

on shareholder concerns over sharply increased spending on bonuses and salaries

And Morgan Stanley's chief financial officer,

Sharon Yeshaya

, doesn't seem to be having any sleepless nights because of the drastic increase in salary expenditure: "We have a good feeling that we paid for performance," the top banker quotes the Wall Street Journal as saying.

Goldman Sachs boss

David Solomon

(60) sees the banks under pressure from two sides when it comes to salaries.

On the one hand, there is “almost full employment” and on the other hand, there is now a shortage of top workers in the banking industry – also because many older bankers aged 55 and over decided during the pandemic to reduce their working hours or even quit their job altogether .

A calming pill remains for worried shareholders of major US banks in view of recent rising costs and falling share prices: the majority of salary increases in the past year are mainly due to bonus payments and not to regular salary increases.

And, as is well known, lavish bonuses can be cut at any time if earnings fall again or the competition for talent eases up.

rei

Source: spiegel

All news articles on 2022-01-21

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