Goldman Sachs will curb payouts to UK staff in particular because of Britain's supertax on bonuses, an industry source said, as the US investment bank dramatically reversed its course on remuneration.
The Wall Street bank set aside nothing for compensation in the fourth quarter, limiting its 2009 compensation pool to $16.2 billion -- well below expectations of a record $22 billion -- and helping push net income above forecasts.
The source said Goldman's 5,500 UK staff would see pay restrained in the wake of Britain's 50% tax on bonuses over 25,000 pounds announced six weeks ago.
A spokeswoman for Goldman declined to comment on specific payouts. Staff will be told share awards next week.
Goldman's Chief Financial Officer David Viniar said the bank took the UK bonus tax into account when it made its compensation decision. The bank had attempted to be fair to both staff and investors and show restraint with its compensation, he said.
The news is further evidence that banks are reducing payouts amid a public backlash and a vow by politicians to stop bankers earning millions just months after being rescued by state bailouts. Goldman has borne the brunt of much anger, and its move could influence rivals as many European banks finalize their own pay plans.
“Clearly what your competitors are doing is of great relevance to any bank,” said Nicholas Stretch of law firm CMS Cameron McKenna. “At the shareholder level, I expect they will be pleased.”
UK staff could be particularly hit as banks assess the tax implications. Swiss bank Credit Suisse said this week it would cut its global bonus pool by 5% and slash payouts to its top 400 managers in Britain by about a third to compensate for the levy.
The UK tax will affect thousands of top bankers working in London. Most banks had been expected to swallow the cost of the tax themselves rather than risk paying staff less and risk becoming less competitive employers. But bankers now look more likely to have to share the hit.
“I think the mood is more to passing on some of the hit to employees, whereas if we had had this discussion before Christmas, I would have said the mood was to ensure those earning very high bonuses would see an immaterial change to their bonuses,” noted Jon Terry, partner and head of reward at PricewaterhouseCoopers (PwC).
Britain's Barclays Plc will kick off the UK bank reporting season on February 16. Chairman Marcus Agius said earlier on Thursday he expected this pay round to be “very different” from past years. (Reuters)