Goldman Sachs and Xiaomo paid the price for the "talent war": profits shrank and expenses hit a record

Remember last year When Wall Street went to the forefront of the battle for talent, it raised salaries for its employees?

Many investment banks such as Citi, JPMorgan Chase and Bank of America have raised their employee salaries sharply, and Goldman Sachs has even raised the annual salary of investment bank analysts who have been employed for one year by 29%.

Now that the year-end settlement is over, they realize the cost of doing so!

Profits shrank and expenses hit record highs

Goldman Sachs' quarterly report released on Tuesday showed that the company's net profit for the fourth quarter of 2021 was $3.94 billion, lower than the expected $4.119 billion, down 13% year-on-year. In addition, earnings per share did not meet analysts' expectations.

Goldman Sachs CEO David Solomon warned in an interview with the Financial Times that "wage inflation is everywhere".

Goldman Sachs' fourth-quarter salary expenses, including bonuses, rose 31 percent year-over-year to $3.2 billion, more than analysts predicted $2.89 billion, quarterly reports showed.

Wage spending rose 33 percent in 2021 to a record $17.7 billion, an increase of $4.4 billion over last year's spending.

Goldman Sachs said in a statement that without the cost of subsidies and benefits, the total cost would fall by 9%.

Meanwhile, its fourth-quarter operating expenses increased 23 percent year-over-year to $7.3 billion, beating analysts' expectations of $6.4 billion.

According to last week's quarterly report, JPMorgan Chase & Co.'s 2021 compensation expense increased by $3.6 billion, and Citi spent an additional $2.9 billion on compensation, dragging down its profit in the fourth quarter.

Citigroup's fourth-quarter profit was $3.18 billion, down 26 percent year-over-year.

JPMorgan chase & Co. reported adjusted revenue of $30.35 billion in the fourth quarter of 2021, slightly higher than market expectations of $29.9 billion.

However, due to the high cost of compensation, technology and so on, JPMorgan Chase spent $71.3 billion in 2021 and predicts that spending will increase to $77 billion this year.

Octavio Marenzi, chief executive of financial services consultancy Opimas, said wage inflation was hitting the banking sector hard.

The robbery war continues

Wage inflation is largely due to the scramble on Wall Street last year.

Earlier, Bank of America and Wells Fargo raised the annual salary of their one-year employees by $10,000.

In the middle of the year, Citi proposed to increase its fixed salary by as much as $25,000 to $100,000 per year. JPMorgan chase and Barclays also raised their annual salaries to $100,000 from $85,000 at the end of June.

After being exposed to the "inhuman" treatment of new analysts, Goldman Sachs eventually followed the wall Street trend and raised the salary of junior analysts in the investment banking business.

Goldman Sachs will increase the annual salary of analysts for one year from $85,000 to $110,000, analysts in two years will increase their annual salary from $95,000 to $125,000, and assistants for one year will increase from $125,000 to $150,000.

Perhaps with money at play, goldman Sachs employees increased by 8 percent in 2021 to 43,900.

However, with the increasingly fierce competition, this year's robbery war will continue.

The Wall Street Journal quoted a person familiar with the matter as saying that JPMorgan chases employees this week paid 30 to 40 percent more bonuses than they did a year ago. "We will be competitive in terms of compensation," JPMorgan Chase CEO Jamie Dimon said on a conference call with analysts last week.

"If that's going to squeeze shareholders' profits a little bit, so be it."

According to the Financial Times on Wednesday, citing people familiar with the matter, JPMorgan Chase has raised the annual salary of junior bankers from $100,000 to $110,000, which is the second time in 6 months that the investment bank has raised the salaries of junior bankers.

After achieving record revenue growth, Goldman Sachs has also prepared a very generous bonus for its senior management.

In addition to the year-end bonus, Goldman Sachs will also pay a one-time special bonus of millions of dollars or more to about 400 partners in its top position to highlight the huge success of the Wall Street investment bank during the epidemic, according to Bloomberg, citing people familiar with the matter.

Citi has also raised wages for junior U.S. investment bankers. The base salary for analysts in the first year will increase to $110,000, while analysts in the second and third years will receive $125,000.

Mark Mason, Citi's chief financial officer, said: "There is a lot of competitive pressure in terms of salary and compensation. ”

During the pandemic, some companies, such as Citi, have also used the home-based work policy to attract candidates. Goldman Sachs and JPMorgan Chase aggressively recalled employees to the office last year, but Goldman told employees last week that they could work from home until Feb. 1, given the risks of the Omilon variant.

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