Hire Wire Oct 18 2011

Goldman Loss Means Cuts in Staff and Compensation

By Julie Steinberg

Goldman Sachs reduced staff, compensation and expenses in the third quarter as it reported its second loss since it went public in 1999.

The bank ended the third quarter with 34,200 employees, 1,300 fewer than in the second quarter of this year, a 3.6% decrease. Five hundred of those were layoffs within Goldman. The rest stemmed from the sale of Litton Loan Servicing, a mortgage-servicing firm, and consolidation resulting from the takeover of the rest of the Goldman Sachs & Partners Australia Group, said Chief Financial Officer David Viniar.

The firm also shrunk its compensation pool. For the first nine months of 2011, an average staffer would take home $292,397, 21% less than the $370,056 taken home in the year earlier period. The ratio of compensation and benefits to net revenues rose to 44% for the first nine months of the year, up from 43% a year earlier.

"The year is not shaping up to be as strong as some of the others," Viniar said. As far as compensation, "right now we're accruing as best we can." Goldman previously announced it would cut at least 1,000 jobs to save $1.2 billion in expenses by the middle of next year.

Viniar said Goldman had shut down its proprietary trading desk as part of its preparation for the Volcker Rule, the provision of the Dodd-Frank act that limits how much of a firm's own capital can be traded. The rule will create a "tremendous cost of compliance" for the entire industry, he said.

Goldman posted a $393 million loss, compared to a $1.9 billion profit in the year earlier period. The firm reported a loss of 84 cents a share, disappointing analysts who had expected a loss of 16 cents a share. The firm reported net revenue of $3.59 billion; analysts had expected $4.3 billion.

Investment banking and trading took a hit. Investment banking revenues were down 33% over the year earlier period, while revenues in fixed income, currency and commodities were down 36% from a year earlier.

Write to Julie Steinberg at Julie.Steinberg@dowjones.com

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