NEW YORK, Sept 21 (Reuters) - Goldman Sachs Group Inc (GS.N) (GS.N) has already set aside more for compensation than it did for all of last year, contrary to speculation that Wall Street earnings and bonuses would be squeezed by the summertime credit crunch.
Goldman, which trounced expectations with a 79 percent increase in third-quarter earnings, said it reserved $16.9 billion in the first nine months of its fiscal year, up 21 percent from last year’s period and exceeding the $16.5 billion set aside in all of 2006.
The 2007 reserves — which average out to $565,000 per employee — will go toward salaries and employee benefits. The bulk of the compensation is paid out in bonuses.
In a briefing with reporters Thursday, Goldman Chief Financial Officer David Viniar said headcount, which rose 17 percent from last year and 7 percent during the quarter, would continue to expand.
“We don’t have a slowdown,” he said.
The rising fortunes of Goldman’s employees reflect the bank’s rising revenue and profit at a time when corporate loans, volatile stocks and swooning mortgage markets made this summer the most challenging in years. Goldman’s third-quarter net revenue rose 63 percent to $12.3 billion.
Bonuses track growth at Wall Street firms, which typically pay out half their revenue to employees. A disproportionate share is concentrated among the high executives and top performers.
Firms each quarter set aside what they estimate they will pay out after the end of the fiscal year, so fourth quarter accruals remain a real wild card.
Rivals Lehman Brothers Holdings Inc LEH.N, Morgan Stanley (MS.N) and Bear Stearns Cos Inc BSC.N all reported lower earnings this week, and several investment banks have announced job cuts in struggling businesses. Morgan and Lehman, though they haven’t exceeded last year’s accruals, are on pace to boost compensation.
Morgan Stanley set aside $13.4 billion for the first nine months, up 25 percent, well on its way to matching the $14.4 billion Morgan paid out in 2006. But the per-employee average compensation this year works out to $280,000 per employee, or half that of Goldman.
Lehman Brothers, meanwhile, set aside $7.33 billion, up 14 percent from the year-earlier period, or $255,000 per employee. Last year Lehman paid out $8.67 billion.
The exception to the trend is Bear Stearns, where nine-month compensation fell 6 percent to $3.10 billion, or $199,730 an employee, as the mortgage meltdown inflicted losses on its trading, financing and hedge fund businesses.
Bear paid out $4.34 billion in salary and bonuses last year. (Editing by Gerald E. McCormick)