The average pay for Goldman Sachs Group Inc. (GS:US)’s top U.K. bankers rose 77 percent in 2012 even as it declined at U.S.-based peers amid calls from governments and the public to reduce executive compensation.
Goldman Sachs paid an average of $4.67 million in 2012 to U.K. employees deemed by regulators as risk-takers, as well as their managers, up from $2.64 million in 2011, according to figures disclosed by the firm. For similar staff at Citigroup Inc. (C:US), average pay climbed 9 percent to $2.38 million. At Bank of America Corp. (BAC:US) it fell 2 percent to $2.36 million, and at JPMorgan Chase & Co. (JPM:US) it slid 3 percent to $3.4 million, totals disclosed separately show.
The largest U.S. banks reported their figures for 2012 as recently as this week under European disclosure rules that are part of a regulatory push to alter pay practices blamed for contributing to the 2008 financial crisis. The filings show a divergence between Goldman Sachs, which shrank headcount while boosting revenue 19 percent in 2012, and competitors such as JPMorgan, which lost more than $6.2 billion that year on botched derivatives bets by London traders. Figures for 2013 won’t be released until later this year.
“Pressure to reduce bankers’ compensation has come from many directions,” said Christopher Wheeler, an analyst with Mediobanca SpA in London. “The greatest pressure is coming from the banks themselves” as they seek to boost profitability.
Goldman Sachs paid 115 U.K. employees almost $537 million in salary, cash bonuses and stock awards in 2012, more than double the amount distributed the year before, according to the firm’s disclosure. While average pay rose from 2011, it was lower than the $6.41 million paid in 2010.
Almost two thirds of Goldman Sachs’s compensation for the U.K. bankers in 2012 was in restricted stock, up from about half in 2011, as firms aimed to align employees’ interests with investors’. The bank’s shares rose (GS:US) 41 percent in 2012, outpacing a 26 percent advance of the 81-company Standard & Poor’s 500 Financials Index. Goldman Sachs earned $7.48 billion that year.
Companywide, the firm put aside less money for staff and more for investors in last year’s first nine months, its financial reports show. It allocated 41 percent of revenue for compensation in the period, down from 44 percent a year earlier. It was the lowest nine-month figure as a public company.
JPMorgan awarded $429 million to top U.K. employees in 2012. The decline in average pay extended a drop from $4.19 million in 2010. Bank of America paid $286 million in 2012. It had paid top U.K. employees an average of $3.57 million in 2010.
Morgan Stanley (MS:US) gave $197 million to top U.K. employees in 2012, the least among the five banks, equating to $1.74 million on average. It paid an average $2.57 million in 2010.
Compensation figures were compiled by Bloomberg from firms’ disclosures, and most had to be adjusted. Goldman Sachs reported in U.S. dollars. Citigroup and Bank of America disclosed figures in British pounds and provided an exchange rate for conversion. Numbers for JPMorgan and Morgan Stanley, reported in pounds, were translated using year-end rates.
Banks must disclose aggregate pay figures for senior management, as well as employees who work in a control function, whose activities have a material effect on the unit’s risk profile or whose compensation is similar to the others.
Goldman Sachs defined senior management as directors of Goldman Sachs International, the firm’s European division, as well as management committee members and managers who led business lines or units that bring in revenue for the Europe, Middle East and Africa region, according to its document.
Citigroup’s number of U.K. employees classified as taking or overseeing risk doubled to 190 in 2012 from 2010, the most among the five U.S. firms. The amount set aside for compensation in 2012 rose 23 percent to $453 million from the previous year. Citigroup’s figures encompass only those in its disclosure defined as fixed pay, and variable compensation named as cash, deferred cash, equity and “vested outstanding.”
Spokesmen for New York-based Citigroup, Goldman Sachs, JPMorgan and Charlotte, North Carolina-based Bank of America declined to comment on their disclosures.
Firms must publish figures at least annually. While some companies released 2012 reports earlier last year, Goldman Sachs and JPMorgan waited until the last week of December. Citigroup disclosed figures Dec. 10, said Mark Costiglio, a spokesman.
Regulators have pressured banks since the 2008 financial crisis to change pay practices blamed for encouraging risky behavior. European Union and U.K. officials proposed rules in 2010 forcing lenders to disclose compensation. Last year, the EU adopted a policy to outlaw banker bonuses that are more than twice fixed pay. Those rules will apply for the first time to awards given in 2015, based on 2014 performance.
The European Banking Authority, set up in 2011 to harmonize banking rules in the 28-nation bloc, defined anyone earning more than 500,000 euros ($682,500) as a “risk-taker,” making them subject to the pay cap. Banks may be able to ask national regulators to exempt staff earning as much as 1 million euros from the rules, the EBA said Dec. 13.
Banks view compensation as a critical tool for retaining talent. The caps create an unlevel playing field and put Europe’s firms at a disadvantage to their peers elsewhere, according to Mercer LLC, a New York-based consulting firm.
“Retention of talented employees is critical to executing our business strategy successfully,” Goldman Sachs said in its compensation document, posted on its website. “Remuneration is, therefore, a key component of the costs the firm incurs to generate revenues, similar to cost of goods sold or manufacturing costs in other industries.”
The 115 Goldman Sachs staff subject to the rules in 2012 rose from 95 a year earlier. That compares with 126 at JPMorgan in 2012, 121 at Bank of America and 113 at Morgan Stanley.
Goldman Sachs cut total headcount to 32,600 at the end of September, down from 39,200 at the end of 2008, according to data compiled by Bloomberg. The firm also named 70 partners in 2012, the smallest class since the firm went public in 1999.
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