Goldman Sachs bankers are forecast to enjoy an 81% rise in their pay and bonuses for 2009, even though the bank may be forced to respond to political pressure by reducing the amount of money it sets aside for employee payouts in the fourth quarter of the year.
Goldman is braced for a furore this week when it completes the US bank reporting season on Thursday, following the row sparked by rival JP Morgan when it disclosed on Friday that it would be handing out $9.3bn (£5.7bn) in bonuses and salaries for 2009.
By the time Goldman unveils the size of its bonus pool, Citigroup, Bank of America and Morgan Stanley will all have published their figures. They are likely to show that chancellor Alistair Darling's estimate for £550m of revenue from his 50% bonus tax was too cautious.
JP Morgan alone is estimated to face a bonus-tax levy from the exchequer of at least £300m. It admitted on Friday that Darling's super-tax influenced its decision to pay staff just 11% of revenues in the fourth quarter compared with a more usual 50%, prompting predictions that other banks would also reduce pay for the final three months of the year. Analysts at Wells Fargo Securities expect Goldman's compensation costs "to drop materially", as do those at JMP Securities, who also predict changes to the way Goldman Sachs structures its payouts so staff receive more in shares.
If bonuses are paid in shares they do not appear under the expense of "compensation" reported by banks, which includes the costs of paying staff such as salaries, benefits and pensions. A new stipulation from the G20, included in its principles on pay introduced in the wake of the banking crisis, states that banks ought to defer bonuses over at least three years and pay a greater proportion of them in shares.
But the JMP Securities analysts concluded that even though the proportion of pay and bonuses to revenues will fall at Goldman, "we still expect an 81% rise in compensation per employee in 2009 to $599,000 per head … although this remains 14% below peak 2007 compensation levels".
Goldman's top executives have already tried to respond to public anger over pay by promising to take their bonuses in shares rather than cash and are also forcing their best-paid employees to make charity donations.
The bank has traditionally reserved 45% of its revenues to pay staff. But analysts note the reductions being expected in the bonus pool in the fourth quarter of the year still give Goldman a competitive advantage in hiring staff: average pay levels remain relatively high.
Goldman is thought to have taken a strategic decision to be last of the major Wall Street firms to report results. It was originally expected to publish last week. Like Morgan Stanley, it traditionally informs staff of their bonuses a day or two before the formal publication of results. But this year both banks appear to have delayed releasing that information until after the figures have been published. Some staff may not learn the terms of their individual payouts until the start of the following week.
Analysts say the last three months of a bank's year are quieter, as traders restrict risk-taking to ensure they do not jeopardise their bonuses. But the last quarter of 2009 was also slower for many banks as the extraordinary revenues seen recently from bond trading eased.
