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Profit jumps, pay cuts at JPM, Goldman

Wednesday, Jan 16, 2013 - 02:07

Jan. 16 - Quarterly profits nearly tripled at Goldman Sachs and net income at JP Morgan Chase jumped 53 percent, but job cuts and lower compensation are still becoming a fixture for Wall Street. Bobbi Rebell Reports.

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Banks are cashing in again- but trimming down the fat paychecks. Goldman Sachs out with a blowout quarter- beating estimates on both the top and the bottom line. Fred Cannon, Director of Research at Keefe Bruyette and Woods: SOUNDBITE: FRED CANNON, DIRECTOR OF RESEARCH, KEEFE BRUYETTE AND WOODS (ENGLISH) SAYING: "Goldman Sachs demonstrated that they could earn a lot more than expected in the 4th quarter and especially we saw very good capital markets activity, especially on the debt side." They are making more money from their own trading account and investment banking, and they are paying out less money to their own people. That's been a boost for shareholders- who sent Goldman stock higher on Wednesday. Morningstar banking analyst Dan Werner: SOUNDBITE: DAN WERNER, BANKING ANALYST, MORNINGSTAR (ENGLISH) SAYING: "Compensation expense accrual was much lower in the quarter. Normally they accrue 40-45 percent of revenues for compensation expense during the first three quarters and then the last quarter they accrued about 21 percent." JP Morgan beat forecasts- thanks to strength in commercial and consumer loans- but CEO Jamie Dimon had his pay cut in half, to a mere $11.5 million. The board - saying he should have had a better handle on the business that led to the $6.2 billion so-called London Whale trading loss. There is a new attitude towards compensation on Wall Street. In addition to the compensation curbs at Goldman and JP Morgan- Morgan Stanley is giving some of its workers I.O.U.s -deferring their bonuses. The idea- discourage excessive risk taking by tying performance to medium term results. It also makes it easier to claw back pay if things go wrong. SOUNDBITE: DAN WERNER, BANKING ANALYST, MORNINGSTAR (ENGLISH) SAYING: "I think the culture has changed slightly but you know overall this is Wall Street and it's a financial center and people are going to be expected to be paid for good work and I'm not saying that they didn't do good work this year, it's just at a lesser volume than maybe in past years." And with new regulations coming soon and tight fisted employers- those who don't get pink slipped- may look to go looking elsewhere to make their fortune.

Profit jumps, pay cuts at JPM, Goldman

Wednesday, Jan 16, 2013 - 02:07

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