Morning Coffee: How Goldman Sachs fell behind on pay. Ex-UBS IBD analyst taunts former colleagues

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Goldman Sachs pay

Compensation at Goldman Sachs is a confused affair. Average pay per head is high: it was $324k globally last year and is around £382k ($535k) in London, where a greater proportion of staff are traders in the front office.  However, as with other banks - but perhaps more so with GS, there's always the suspicion that senior staff are getting most of the pie. The average member of "code staff" (senior staff and risk takers) earned $1.4m at Goldman Sachs in London in 2016. This was more than at Citi and Bank of America (both $1.2m) and less than at J.P. Morgan ($1.5m) - but Goldman Sachs stands accused of falling behind on compensation at junior or mid-ranking levels, depending upon which compensation surveys you look at.

Among Goldman employees, there are complaints that pay is falling irrevocably. When a table appeared in 2016 alleging that senior traders at Bank of America were earning as much as $6.5m, there was consternation among GS people whose pay didn't match up. Some Goldman insiders now claim that bonuses are no longer as closely aligned to performance as they were in the recent past, and in any case performance at GS hasn't been great. Under pressure to cut costs and maintain returns to shareholders, Goldman has been cutting the proportion of revenue it allocates to pay: the compensation ratio was 37% in 2017; before the financial crisis, it was typically 45% or more. Things are unlikely to get better: although Goldman continues to emphasize the importance of talent (Marty Chavez said it five times during the recent investor call), analysts at KBW note that Goldman will have to manage expenses tightly even as revenues improve.

Goldman's pay predicament is underlined by the fact that CEO Lloyd Blankfein was paid less than rivals for the second year in a row for 2017. Bloomberg notes that Blankfein used to be the biggest-earning bank chief: he topped the charts between 2011 and 2015. Since then, he's fallen behind. Despite a 9% hike to $24m last year, Blankfein's total potential compensation (including salary and deferred bonuses) remains below Jamie Dimon at J.P. Morgan ($29.5m), and James Gorman at Morgan Stanley ($27m).

Goldman employees can still console themselves with the thought that their great leader is still paid more than Mike Corbat at Citi or Brian Moynihan at Bank of America (both $23m). In the latter case, however, there will be suspicions that the ex-Goldmanites in BAML's fixed income division are being paid well nonetheless, even though headhunters suggest there's disgruntlement there too this year.

Separately, an investment banking analyst who left UBS in 2012 claiming that bankers were unhappy people is trolling hard all over again. Financial News reports  that Stephen Ridley has set up a "private crytpo-fund" with which he claims to have earned 94% returns last month whilst "skiing in the alps". Ridley, who has no regrets about leaving banking and maintains that people in the industry are, "passionless...mundane...and lifeless," is only making his fund available by invitation and aims to keep things "kind.. and simple." When he left banking, he wanted to be a rock star; so far, he has achieved some recognition in Russia.

Meanwhile:

Goldman Sachs hired Reinaldo Aguiar, a former senior software engineer at Google. Aguiar will work on Marquee. (Business Insider)

Charles Eve, who has led compliance within Europe, the Middle East and Africa at Goldman since 2005, is leaving. (Financial News) 

Some banks are issuing Brexit-related contracts to staff being moved overseas on a temporary basis, saying they might have to come back to London if banks don't need full European offices after all. This is making life hard for people with families. (Financial Times) 

Brian Moynihan on moving BofA operations to Dublin because of Brexit: "We are spending hundreds of millions of dollars and the customers are not going to get anything out of it, it is really tedious stuff." (Daily Express) 

The heir apparent to Steve Schwarzman at Blackstone is described as, "warm and well grounded." He's also ruthless. (Financial Times)

BNP Paribas hedge fund trader J.P. Muir quit to run an elder care business. (HFAlert)

Reasons to invest your bonus in real estate. (Bloomberg) 

Quantum computers will need entire new programming languages. Microsoft has already invented one. (Technology Review) 

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Photo credit: Robert Daly/Getty

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