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Goldman Controlling, Not Cutting, Compensation Expenses

Pre-beard days

Pre-beard days

Banks are cutting operating expenses – particularly compensation costs – at every turn; firms that rely on investment banking revenue can’t survive. These are two prevailing principles on Wall Street that were disproven, to a degree, by Goldman Sachs on Tuesday.

Goldman reported a better-than-expected first quarter, driven by a 36% uptick in investment banking revenue, making up for the firm’s lackluster trading results. Goldman topped rival J.P. Morgan’s investment banking revenue totals for the first time in five years.

Meanwhile, the firm’s compensation ratio – pay and benefits costs compared to net revenues – fell less the one percentage point, despite all the rhetoric surrounding cost-cutting.

Goldman employs just 400 fewer workers than it did at this time last year, a tiny number compared to other large global banks. Staffers are on pace to make roughly the same as last year – around $136,000 on average. It’s clear Goldman is controlling costs, not cutting them.

Still, Chief Executive Lloyd Blankfein’s tone was cautious, if not somber, similar to that of Citi CEO Michael Corbat, whose firm unveiled strong investment banking numbers earlier this week. Many Wall Street CEOs appear to share the same philosophy: bragging to the public does little good in today’s environment.

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  3. Shut up and listen.

(Source: Business Insider)

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