The German operation of Goldman Sachs - Goldman Sachs AG - just released its accounts for the 2016. If you're among the 200 Goldman Sachs bankers facing relocation from London to Frankfurt thanks to Brexit, you might want to take note. Goldman Sachs AG is rather different to London-based Goldman Sachs International.
Firstly, it's tiny. While Goldman Sachs International is a behemoth employing 5,903 people, Goldman Sachs AG's official employee list stretches to 133. This may understate the reality (Richard Gnodde has said that Goldman employs around 200 people in Frankfurt), but still. - Germany is less of a branch office and more of a backwater.
Secondly, pay in Frankfurt is lower than in London - but not that much lower. Suggestions that migratory London bankers could have their pay re-rated to substantially lower levels look overdone. Pay per head at Goldman in London was €432k last year; in Frankfurt it was €383k. Yes, you'll get paid less in Frankfurt, but only 13% less. It's not the end of the world.
Importantly, however, last year's discrepancy in Frankfurt pay may disappear when traders migrate across from London. In 2016, 67% of Goldman's Frankfurt employees were in non-revenue generating functions in the middle and back office. In London, 54% of Goldman employees were in these support functions (AKA 'the Federation'). As the proportion of front office staff at Goldman in Frankfurt increases, so too will pay.
Lastly, the report emphasizes the extent to which Goldman's German business is reliant on London. For the moment, it says that equity capital markets and debt capital markets activities in Germany are carried out by GS International, in return for which the German company receives an "allocation of underwriting commissions....based on a specific transfer mechanism." Despite - or maybe because of - this, employees at Goldman's German business generate far higher profits than those in London. Profits per head at Goldman's German operation were €396k last year. In London, they were €211k.
Photo credit:Youth with Big Money by thejuniorpartner is licensed under CC BY 2.0.