NEW YORK (AP) — Goldman Sachs said fourth-quarter profits fell 13% from a year earlier, largely because the bank prepared to pay hefty paychecks to its well-paid employees.
This is the latest sign that wages are rising sharply, especially on Wall Street. Most of the big banks that have released their results so far have indicated their intention to pay their employees more in the coming year.
The New York-based investment bank posted a profit of $3.94 billion, or $10.81 per share. That’s down from $4.51 billion, or $12.08 per share, in the same period a year earlier. The results beat analysts’ expectations, which on average were looking for earnings of $11.80 per share, according to FactSet.
While Goldman was able to boost revenue in the quarter, those gains were more than wiped out by the company’s compensation spending. The bank set aside $3.25 billion to cover compensation and benefits in the quarter, up 31% from a year earlier.
Goldman typically has high compensation expenses, particularly in the last quarter of the year as the bank prepares to pay its annual bonuses to its employees. These bonuses can often be several times an employee’s salary, especially the highest paid traders and investment bankers in the company.
But rising inflation, along with growing competition for employees among investment banks, has pushed salaries considerably higher at banks. Bloomberg News reported late last week that the company was preparing to pay special one-time bonuses to keep its most valuable employees.
Company pay is directly tied to overall company performance over the year, and this has been an incredibly good year for Goldman. The company made $21.64 billion in profit last year, more than double what it earned in 2020.