Goldman boosts returns to shareholders through layoffs
Goldman Sachs Group Inc paid a smaller portion of its revenue to employees in 2012 as it laid off staff, signaling that management at the top Wall Street bank may be ceding power to the shareholders who supply the capital.
The bank set aside just 37.9 percent of its 2012 revenue for compensation, the second-lowest proportion since Goldman went public in 1999. But pay per employee rose because revenue was up and layoffs reduced staffing levels.
Lower compensation combined with big revenue gains helped Goldman beat analysts' earnings expectations for the fourth quarter. The bank on Wednesday said profit nearly tripled, boosted by higher stock and bond values, and increased revenue from trading, dealmaking and money-management.
"We were not expecting as much revenue in the capital markets as what they were able to achieve," said Joe Terril, president of the St. Louis-based investment firm Terril & Co. "And management appears to be retaining quality people without giving all the revenue away in the form of compensation."
Goldman posted quarterly earnings of $2.8 billion, or $5.60 per share, up from $978 million, or $1.84 per share, in the same period a year ago.
Analysts had expected the New York-based bank to earn $3.78 per share, on average, according to Thomson Reuters I/B/E/S.
Goldman shares were up 2.4 percent at $138.91 in early trading.
A significant part of Goldman's earnings boom came from improvements in market values in the stock and bond markets, as well as increased activity from clients.
The bank said it took in "significantly higher" revenues from
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