Goldman windfalls to be thinly spread
Goldman Sachs is set to make a killing in the final quarter. But only a select few at the firm are likely to see that feed through to bonuses.
The US bank is expected to book a profit of around $1bn on its investment in Industrial and Commercial Bank of China (ICBC), which is set to float on the Hong Kong stock exchange on Friday. It's also likely to earn around $600m in additional revenue from the initial sale of shares in a series of Japanese golf courses.
As a result, Guy Moszkowski, an analyst at Merrill Lynch, is predicting profits at Goldman could rise over 60%, to $9.1bn.
If compensation increases proportionately, employees at Goldman could be in for a bumper year. Last year, the bank paid its average staff member $521,000 (277,572). All things being equal this year's predicted profits suggest an average $834,000 payout.
All things are not equal, however. While payouts for this year will be good, Richard Bove, an analyst at Punk Ziegel & Co. in the US, predicts beneficiaries of this quarter's windfall will be relatively few. "There is no doubt that people at Goldman are going to make a lot of money this year," he tells us. "But that's on the back of record earnings in the first six months."
Bove says only partners and people directly involved in the successful deals are likely to see any upside from bumper fourth quarter profits: "The elite core of partners will share in the increased bonus pool; whoever was astute enough to make the ICBC investment will be compensated extraordinarily well; and the distressed debt group that invested in the golf courses will certainly be compensated handsomely."
But will these very specific investments benefit most people in the firm? Unfortunately not. Bove says: "Unlike higher profits in equities or investment banking, the answer is no."