Goldman Sachs To Raise Trader Bonuses Amid Revenue Decline

Goldman Sachs plans to increase trader bonuses, countering a drop in trading revenues and staff unrest.

How is Goldman Sachs' trading division performing in 2023?

Despite a decrease in trading division revenues this year, Goldman Sachs is planning a modest increase in the bonus pool for its traders. This decision comes after last year's significant discontent among trading staff due to pay cuts, despite higher profits. The discontent was cited as a reason for numerous notable departures from the bank. Goldman's revised approach to bonuses, especially for top performers, reflects a shift in strategy to maintain its competitive edge and retain key talent in a fiercely competitive market.

Market Context And Performance Impact

The trading business at Goldman Sachs, split between fixed income, currencies, commodities, and equities, faced varied fortunes in the first nine months of 2023. While equities trading revenue remained stable, fixed income and commodities saw a 16% decline compared to the previous year. In contrast, 2022 was exceptionally profitable for Goldman's trading division, buoyed by market volatility due to the Federal Reserve's rate hikes and geopolitical tensions. However, the overall slowdown in 2023 has not equally affected all trading segments, with some areas like equity trade financing for hedge funds experiencing significant growth.

Goldman Sachs is not alone in adjusting its bonus structure. Bank of America is also reportedly increasing its trader bonus pool slightly, whereas JPMorgan Chase is expected to keep its bonus pool on par with 2022 levels. These changes across major Wall Street banks indicate an industry-wide recognition of the importance of rewarding top performers amidst a challenging financial landscape. Goldman's decision to allocate a larger revenue share for banker compensation, announced in October, further underscores the firm's commitment to attracting and retaining talent.

Goldman's Commitment To Talent Investment

Goldman's leadership, including CEO David Solomon, has emphasized the importance of rewarding top talent to prevent them from moving to competitors. A Goldman spokesperson reiterated the company's unchanged compensation philosophy, focusing on investing in people, particularly high achievers. This stance, alongside competitive pay adjustments, reflects Goldman's strategy to navigate a complex financial environment while ensuring its workforce remains motivated and loyal.

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