Goldman Beats Reduced Estimates As FICC Revenues Plunge 36%, Average Comp Run-Rate Of $494K/Year
Goldman announced Q3 results, in which revenue beat recently dramatically reduced estimates, coming at $8.9bln vs. Exp. $8.03bln, as the earnings print at $2.98 was markedly better than consensus of $2.29. Yet aside from the pig lipstick, results were a material deterioration from the prior year period: Net revenues in the catch all Trading and Principal Investments were $6.38 billion, 36% lower than the third quarter of 2009 and 3% lower than the second quarter of 2010. And revenues in the all important Fixed Income, Currency and Commodities (FICC), aka "whatever we want OTC spreads group" were
$3.77 billion, 37% lower than a strong third quarter of 2009, "reflecting
a challenging environment during the quarter, as activity levels were
significantly lower compared with the third quarter of 2009. The
decrease in net revenues compared with the third quarter of 2009
reflected lower results in each of FICC’s major businesses, including
significantly lower net revenues in interest rate products and credit
products." And for all those looking for the direct impact of the Goldman reputational damage, look no further than here: "Net revenues in Equities were $1.86 billion, 33% lower than a strong
third quarter of 2009. This decrease primarily reflected significantly
lower net revenues in the client franchise businesses, principally due
to lower activity levels compared with the third quarter of 2009."
And some bad news for all those Goldmanites expecting record bonuses:
The accrual for compensation and benefits expenses was $3.83 billion for
the third quarter of 2010. The accrual for compensation and benefits
expenses was $13.12 billion for the first nine months of 2010, a 21%
decline compared with $16.71 billion for the first nine months of 2009.
The ratio of compensation and benefits to net revenues for the first
nine months of 2010 was 43.0% (11) (which excludes the
impact of the $600 million U.K. bank payroll tax in the second quarter
of 2010), down from 47.0% for the first nine months of 2009.
Then again, Goldman did record that negative compensation accrual in Q4, in essence making the full year accrual lower than the 9 months ended Sept 30, 2009. Annualizing the current compensation accrual, results in $17.5 billion of full year payments. Dividing this number by the total staff of 35,400 (excluding associated entities), implies an average compensation of $494K per year. Of course, should Goldman not have a positive Q4 compensation accrual like last year, the total comp would be a paltry $370K per employee, which would likely result in a mutiny.