It couldn’t have come at a worse time for Goldman Sachs employees. For Goldman Sachs itself, however, it might provide the perfect cover for paring performance-related pay to the bone.
Late yesterday, Goldman Sachs announced that it’s paying $5.06 billion to resolve civil claims relating to its, ‘securitization, underwriting and sale of residential mortgage-backed securities from 2005 to 2007′. Thanks to this enormous fine, it added that fourth quarter earnings will be reduced by $1.5bn after tax.
If you’re a Goldman employee waiting for your bonus, this looks like a disaster. In the fourth quarter of 2014, net earnings at Goldman Sachs were $2bn. Following the $1.5bn penalty, they could be down 75% at last in the fourth quarter of 2015, and by a third or more for 2015 as a whole.
During the firm’s third quarter conference call, CFO Harvey Schwartz explained that Goldman sets its bonuses by looking at the performance of the firm, followed by the performance of the business, followed the performance of the individual. Individuals at Goldman Sachs need now to hope that either their own performance and that of their business eclipse that of the firm, or that Goldman won’t have time to reduce its bonus pool before bonuses are announced next week.
Separately, non-working traders everywhere can draw hope from Adriana Ennab at Credit Suisse. Between 1980 and 1989, Ennab was a repo trader at Goldman Sachs. Then she was a fixed income trader and global product manager at Merrill Lynch until 1998. Then she left banking to become, variously, a headhunter, event manager, bar operator, and crowdfunding platform runner. Now she’s back in banking, this time as a public policy manager at Credit Suisse. Ennab got back into banking through Credit Suisse’s ‘returnship’ programme: “I have gained my independence again. I remember who I was before I took time off to raise a family,” she told the blog WomenReturners.
Meanwhile:
J.P. Morgan’s share price has fallen more than 10% in two weeks. (Financial Times)
J.P. Morgan’s M&A bankers made more than its DCM bankers for the first time in seven years. (MarketWatch)
Not happy with hiring a lot of new M&A bankers, Nomura has also appointed a new head of North American M&A: Mike Hill is taking over on an interim basis. (WSJ)
Traders will feel the pinch as banks are required to set aside 40% more capital to support their trading books. (Bloomberg)
Fresh from making redundancies, Morgan Stanley’s got a new global head of fixed income. (Business Insider)
Steve Cohen played the Powerball. (Bloomberg)
Trader sacked for sending explicit messages using Bloomberg Chat whilst at ANZ claims this was the culture of the bank. (DailyMail)
Sad guys on trading floors, the Tumblr. (Sadguysontradingfloors)
Related articles:
Morning Coffee: How to earn £9k ($13k) an hour at Goldman Sachs. Uproar at J.P. MorganHow much do the big earners make every hour at Goldman Sachs. And J.P. Morgan is risking mutiny.
Morning Coffee: Turn two years in IBD into a brilliant career outside banking. Credit Suisse bonus doomOne minute you're a lowly analyst in IBD. The next, you're a world class venture capitalist.
Morning Coffee: The most mysterious and notorious trader of the past decade. Drunken deal goes wrongIn the ten years from 2000, one trader made more than all the rest. Now he's in court, but we still know very little about him.
Photo credit: Ice cube by Pierre (Rennes) is licensed under CC BY-NC-ND 2.0