Goldman Sachs warns traders about shrinking bonuses even as trading turnover increases

The world’s leading investment bank Goldman Sachs Group (NYSE: GS) recently announced a year-end bonus reduction for traders, despite seeing its trading revenue increase this year.

Goldman’s annual trading revenue is $25 billion, and analysts estimate it will surpass last year’s 15% mark. However, the company’s total revenue fell 21%.

The bank said it is currently dealing with a slowdown in its businesses, particularly in investment banking and wealth management, Reuters reported.

The slowdown was mainly due to rising interest rates and falling company valuations. Bloomberg reported that earlier this week, the bank informed its executives in the global markets division to expect a smaller bonus for 2022.

Goldman’s return on equity stood at 12% for the first nine months. However, Bloomberg reports that the company’s leaders are trying to prevent the bank from losing land.

See more earnings on GS

Also read: Goldman Sachs boss predicts recession, warns risk-based businesses: ‘Time to be cautious’

Goldman has struggled to protect its profits following a recent foray into the consumer banking segment, which has been hit by a global slowdown in other businesses like trading.

“We always tell people that their bonuses are based on how they do it, how their team does it, and ultimately how the company does it,” a person familiar with the company’s processes told Bloomberg. “This year, some traders who make a lot of money will have to fund other parts of the bonus fund.”

Last month, compensation consultant Johnson Associates report that bankers across Wall Street will likely see their bonuses drop by as much as 20% in 2022. Additionally, their partners in the underwriting sector could see their incentive bonuses up to 45% off.

Photo: Courtesy of World Bank photo gallery on flickr

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