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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A U.S. district judge conditionally approved SAC Capital’s record-setting $602 million settlement with the Securities and Exchange Commission. The deal can only go through in its present form – with SAC neither admitting nor denying guilt – pending the results of an appeals court decision involving Citigroup.
It’s official. The European Union passed rules that will cap banker bonuses at 100% of annual salary, or twice that number with the approval of shareholders. The new rules will go into effect next year.
Former MF Global broker Evan Brent Dooley, who pleaded guilty to making unlawful trades that cost the firm $141 million, was sentenced to five years in prison on Tuesday. Prosecutors wanted 10 years.
How do investment bankers working 100-hour weeks remain normal? “One obvious answer to that is that they probably can't,” says one former Goldmanite.
The M&A world was fairly quiet in March, but optimism remains high, at least at J.P. Morgan, the U.S. bank sitting atop the M&A league table. Chris Ventresca, the head of the J.P. Morgan's M&A group, sees lots of deals happening in 2013.
U.S. asset management giant BlackRock booked a strong first quarter, easily beating estimates with a 10% surge in profit. The New York firm is hiring, too.
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