Goldman Sachs preserves profits by cutting back on pay
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Friday 18 October 2013
Goldman Sachs safeguarded its profits over the third quarter by cutting expenses, slashing the amount it puts aside to pay its bankers as revenues dropped by 20 per cent amid a slowdown in bond trading, one of its key businesses.
The Wall Street bank said its revenues in the three months to September fell from $8.35bn (£5.22bn) last year to $6.72bn this year, coming in below analyst forecasts of $7.41bn. Revenues from the fixed-income, currency and commodities business that Goldman undertakes for its clients were particularly weak, declining by 44 per cent, with the bank's chief executive, Lloyd Blankfein, acknowledging that the results "reflected a period of slow client activity".
In particular, fiscal uncertainty stemming from the recently resolved impasse in Washington hit the sector through the quarter. Activity in the markets was also affected by nervousness surrounding possible policy changes from the Federal Reserve, as the American central bank considers when and how to begin reducing the scope of its $85bn-per-month bond-buying programme.
But Goldman still managed to keep its profits intact, with net earnings of $1.52bn for the three-month period, down only marginally compared with last year. Underlying this performance was a drive to cut costs, including the bank's compensation bill.
Goldman said it had reduced the money it put aside to pay its employees to $2.38bn for the quarter, down 35 per cent from the same period last year. The reduction came as the company's headcount rose 3 per cent compared with the second quarter of this year.
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