NEW YORK (AP) – Goldman Sachs said its fourth-quarter profits fell by 13 per cent from a year earlier, largely due to the bank preparing to pay out hefty pay packages to its well-compensated employees.
It’s the latest sign that wages are increasing sharply, particularly on Wall Street. Most of the major banks who have reported their results so far have indicated plans to pay employees more in the upcoming year.
The New York-based investment bank earned a profit of USD3.94 billion, or USD10.81 a share. That’s down from USD4.51 billion, or USD12.08 a share, in the same period a year earlier. The results missed analysts’ expectations, who were looking for on average a profit of USD11.80 a share, according to FactSet.
While Goldman was able to grow revenues in the quarter, those gains were more than wiped out by the firm’s compensation expenses. The bank set aside USD3.25 billion to cover compensation and benefits in the quarter, up 31 per cent from a year earlier.
Goldman typically has high compensation expenses, particularly in the last quarter of the year as the bank prepares to pay out its annual bonuses to its employees. These bonuses can often be multiple times an employee’s salary, particularly the firm’s best-paid traders and investment bankers.
But rising inflation, as well as rising competition for employees among the investment banks, has pushed wages significantly higher at the banks.
Bloomberg News reported late last week that the firm was preparing to pay out special one-time bonuses to keep its most valuable employees.