According to Bloomberg report and other sources, The Goldman Sachs Group Inc. (GS) plans to slash salaries of some London-based investment bankers. This move would put an end to the two-year pay rise deal agreed upon in 2009.
In the wake of competition with other banks and pressure from UK officials to limit the bonuses, in 2009, Goldman increased the base pay of fewer than half of the company's 6,500 employees in London to compensate for bonuses with the clause of terminating the deal after two years.
In 2010, Goldman raised base salaries of a number of top level executives including Chief Executive Lloyd Blankfein, whose base salary was increased to $2 million from $600,000, which invariably increased fixed costs for the bank.
Since the financial crisis in 2008, base salaries have spiked 30% to 80% at Wall Street banks. As a whole, though the rise in salaries had affected the banks, it benefitted employees, as their salaries increased. Irrespective of profits earned by banks, fixed costs got significantly augmented. All these had a negative effect on the banks’ results.
Beginning 2012, Goldman plans to cut down London employees’ salaries in line with the current market rates, though employees will be benefitted as the rates will not be as low as it was in mid-2009.
Therefore, based on the current economic environment and regulatory scrutiny of bankers’ pay, Goldman plans to invoke the deal and reduce salaries of employees in London. Moreover, in the last few quarters, banks have come up with cutting of jobs driven by the higher level of fixed costs.
Among other banks, UBS AG (UBS), Credit Suisse Group (CS) and Barclays Plc (BCS) have come up with the plan of retrenching hundreds of staff in their investment banking arms to rapidly bring down fixed costs in the current worsening markets.
Goldman currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
BARCLAY PLC-ADR (BCS): Free Stock Analysis Report
CREDIT SUISSE (CS): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
UBS AG (UBS): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment