Goldman Sachs Cuts Employee Benefits After Profits Fall

First quarter earnings per share at Goldman Sachs was better than expected but revenue missed the mark, analysts say. Indeed, the bank delivered an adjusted $5.71 earnings per share, which is significantly higher than the estimated $4.99.  However, quarterly revenue of $8.81 billion fell short of analyst forecast $8.97 billion. That is 13 percent lower than revenue posted during first quarter 2018.  Specifically, this drop reflects revenues within the bank’s institutional client services and investing and lending sectors. 

Regarding the results, CEO David Solomon said, in a statement, that the bank is “focused on new opportunities to grow and diversify our business mix and serve a broader range of clients globally. With improving momentum across our businesses, we are confident that Goldman Sachs will generate attractive returns for our shareholders.”

Looking at the results more closely, net revenues on fixed income, currency, and commodities (FICC) fell more than 10 percent year-over-year, to $1.84 billion.  This slump has been attributed to “lower net revenues in interest rate products, currencies, and credit products.”

In addition, equities trading revenues plummeted nearly 25 percent year-over-year, to $1.77 billion.  Apparently this is mostly hinged upon “significantly lower” net equity revenues on client execution, and primarily derivatives.  

In addition, the bank also stated, “During the quarter, equities operated in an environment characterized by improved market conditions, however client activity and levels of volatility were both lower compared with the fourth quarter of 2018.”

And what that, Goldman Sachs cut employee benefits. This first quarter, the average Goldman Sachs employee earned nearly $91,000 in total compensation and benefits. And that is after the cut:  last year, the average total compensation for the same quarter was $119,300,000.  

The bank says that this $29,000 drop in benefits is a means to offset the bank’s drop in profits, which is down 21 percent to $2.25 billion.  Unfortunately, the investment powerhouse struggled with trading units on the heels of two major events, this year:  the government shutdown and the trade war with China. The amount the bank needs to offset include a 24 percent decline in stock trade revenue, which is down to $1.77 billion, as well as an 11 percent decline in bonds, currencies, and commodities, which is down to $1.84 billion.