Goldman Sachs traders on $30m fall out of favor
If you wanted a reminder that banking is a cyclical industry, where today's heroes are tomorrow's zeroes and fine times can suddenly turn, Goldman Sachs' second quarter results are a good place to start.
Amidst the massive ($504m) writedown on the consumer platform, the credit losses relating to First Republic Bank, and $485m of impairments on real estate investments, Goldman confirmed today that the traders who were the heroes of 2021 are now among the poor performers of 2023.
Two years ago, Goldman Sachs' top commodities traders (people like Ed Emerson, the US-based head of commodities trading) were paid $30m each, according to Bloomberg. Today, Goldman said its commodities trading revenues were "significantly lower" in the second quarter, contributing to a 21% year-on-year decline in fixed income sales and trading revenues.
Macro traders, who were last year's heroes, also underperformed. Credit and mortgage traders, who didn't do so well last year, are doing "significantly" better.
It's not just pockets of traders who are thriving at Goldman in 2023: equity capital markets bankers are also doing suddenly fine, with revenues up an impressive 133% year-on-year from last year's exceptional low.
Anyone expecting to be paid generously at Goldman this year, may, however, be disappointed. It's not just the writedowns, it's not just the enfeebled macro and commodities revenues, Goldman's M&A bankers are also struggling and the return on equity in the second quarter - at just 4% for Q2, looks painful.
Goldman cut overall compensation spending by just 1% in the first half of 2023 versus the same period of 2022. However as at Morgan Stanley this includes the money it spent on severance pay.
As Goldman tries to cope with its woes, there are signs that it's continuing to trim headcount. 800 people disappeared in the second quarter; 2,400 have disappeared in the past year.
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