It is no secret that successful investment bankers on Wall Street are among the top earners on this globe. At Goldman Sachs, top bankers can receive tens of millions in annual bonuses. Despite the Covid-19 pandemic that has been ongoing for almost 2 years, the markets were in a bullish mood in 2021. Thus, compensation costs at Goldman jumped 33% to $17.7 billion for 2021, a whopping $4.4 billion increase fueled mostly by pay increases for good performance, executives said. That made the average per employee compensation reach about $404,000 in 2021, up from $329,000 in 2020.
The pay increase at Goldman largely tracked the year-over-year increase in non-interest revenues, a 33% jump to $52.9 billion, driven by a massive 55% gain in investment banking revenue. The story was different in 2020 when revenues climbed 24% and compensation rose just 8%.
The jump in compensation costs disclosed across Wall Street for 2021 may have surprised analysts because in the prior year, the first of the pandemic, banks showed restraint on compensation.
That’s what Goldman Sachs CEO David Solomon explained on Tuesday during a conference call with analysts to discuss the bank’s fourth-quarter results. At one point during trading, shares of the bank had fallen more than 8% after a jump in quarterly expenses took investors by surprise.
Executives at JPMorgan Chase and Citigroup have made similar disclosures, saying that they were forced to pay up to retain valued employees. It makes sense that as inflation has hit nearly every type of good and service this year, it would eventually reach Wall Street personnel.