Goldman’s Solomon warns of ‘wage inflation everywhere’ as expenses jump

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Goldman Sachs CEO warned of “wage inflation everywhere” after a sharp surge in expenses hit Wall Street’s profits in the fourth quarter.

In an interview with the Financial Times, David Solomon said that, like other large corporations, Goldman is working on higher wage demands from its employees. “There is no doubt that inflationary pressures over compensation have had an impact,” he added.

Solomon said on Tuesday after Goldman reported fourth-quarter net income of $ 3.8 billion, or $ 10.81 per share, compared to $ 4.36 billion, or $ 12.08 per share, of the same period last year. I did.

According to data compiled by Bloomberg, this was a bigger drop than analysts predicted, with a consensus forecast for net income of around $ 4.1 billion.

Goldman shares closed at $ 354.40, down 7%.

Goldman’s workforce increased 8% in 2021 to 43,900, as banks paid bumper bonuses to reward staff, especially investment bankers, for last year’s record annual profits. , The salary has also increased sharply.

Salaries, including bonuses, increased 31% year-on-year to $ 3.2 billion in the fourth quarter, above analysts’ forecast of $ 2.9 billion. Annual salary costs in 2021 increased 33% to $ 17.7 billion, reflecting growth in banks’ net revenues this year.

Bank stocks were already under pressure after JPMorgan Chase Warning on friday He said he wouldn’t be able to reach his earnings target this year, partly due to higher costs. Goldman reported operating expenses for the fourth quarter up 23% year-on-year to $ 7.3 billion, exacerbating these concerns by surpassing analysts’ expectations of $ 6.4 billion.

“It’s a clear reminder that wage inflation is having a big impact on the banking sector,” said Octavio Marenji, CEO of capital markets management consultancy Opimas. ..

Fourth-quarter revenue was lacking in estimates, but full-year 2021 net income was $ 21.2 billion, more than double that of 2020, the largest in bank history.

Revenues from investment banking mergers and acquisitions, initial public offerings and debt trading advice increased 45% to $ 3.8 billion in the fourth quarter. Rapid increase in transactions activity. JP Morgan reported last week that investment banking earnings reached $ 3.2 billion, up 28% year-on-year.

Analysts expect the streak to end in early 2022, following the high levels set last year, the eighth consecutive quarter of year-on-year earnings growth for Goldman’s investment banks.

However, the trading boom could not make up for the sluggish performance of the bank’s trading sector. Unit revenue, which surged in 2020 due to high transaction volumes during the pandemic, was $ 3.98 billion, down 7% year-on-year, below analysts’ forecast of $ 4.3 billion.

Solomon said: [trading] jobs. “

Asked about the fall in Goldman’s stock price on Tuesday, Solomon said: .. .. The focus is on the execution of the plan, not the short-term fluctuations in stock prices. ”

The investment banking and trading sectors accounted for more than 60% of Goldman’s earnings. The two units are by far the largest profit engine, two years after Solomon. Outline of the plan Focus on new businesses such as consumer banking and transaction banking.

Solomon said he would “refresh” investors with next month’s banking goals.

Goldman’s Solomon warns of ‘wage inflation everywhere’ as expenses jump Source link Goldman’s Solomon warns of ‘wage inflation everywhere’ as expenses jump

The post Goldman’s Solomon warns of ‘wage inflation everywhere’ as expenses jump appeared first on California News Times.

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