Huge Profit at Goldman Brings Big Bonuses
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By JOHN HOLUSHA
Published: December 12, 2006
The Goldman Sachs Group reported today that it earned $9.34 billion this year, the most in Wall Street history, and that it would set aside $16.5 billion for salaries, bonuses and benefits for employees.
That figure works out to an average of $622,000 for each employee, although the payouts will be far from uniform: the investment bankers at Goldman who arrange mergers and acquisitions or sell corporate stock to investors will receive much more, and support staff and other kinds of employees much less.
In the company’s fourth fiscal quarter, which ended Nov. 24, profits increased 93 percent over the year before, to $3.16 billion, or $6.59 a share, exceeding the forecasts of most analysts.
Most other major Wall Street investment banks will report their results later this week or next week, and analysts expect robust figures across the industry.
The bonuses at Goldman, the leading merger advisor in the industry, and elsewhere on Wall Street are expected to give the New York area’s economy a substantial boost, particularly in sales of high-end residential real estate, luxury cars and other pricey goods. “When these guys learn what their bonuses are, we are among the first people they call,” said Pamela Liebman, the chief executive of the Corcoran Group, a residential brokerage. “They call their mothers, and then their real estate brokers.”
Ms. Liebman said that investment bankers “work hard and want to live well,” and that they are usually interested in buying a luxury apartment in Manhattan or a second or third residence elsewhere.
She said her agency is already getting calls in advance of the bonus announcements this year, and that the interest is not limited to the top executives of Wall Street firms. “Even the junior guys want to spend their bonuses on residential real estate.”
Two years ago, BMW of Manhattan opened a showroom at 67 Wall Street, so that investment bankers would not have to take the time to travel uptown to its main sales and service operation at 57th Street and 11th Avenue.
At the time, Jeffrey A. Falk, the president of the dealership, said the intention was to get physically closer to potential customers.
“This is part of a strategy we have been developing over the past two years to make it more convenient for our demographic.”
Speaking today, he said there has been an increased level of what he called “pre-shopping” at the Wall Street showroom, based on anticipated bonuses.
“They are shopping now, and talking to salesmen based on what they think their bonus will be,” Mr. Falk said. “Then in January and February, we’ll get the orders.”
Spouses and the high-end retailers that cater to them feel the effect of the bonus payment, said Faith H. Consolo, vice chair of Prudential Douglas Elliman, a commercial brokerage.
“The luxury market is very dramatically affected by bonuses,” Ms. Consolo said. “We are talking furs, jewelry, apparel and beauty items like $250 jars of face cream. Anything that makes them look good or feel good.”
Luxury spas are likely to see an influx of business as well, she side, as executives use part of their bonuses to send their spouses on spa vacations.
2006 is the third consecutive year of record-breaking earnings for Goldman, which is the world’s largest securities company as measured by the total market value of its stock. And the company appears positioned to continue growing in its crucial investment banking business.
The company said its backlog of merger and underwriting deals was larger at the end of November than it was at the end of August.
Rising stock prices generally, an active market in fee-generating business deals and gains on investments, many of them in Asia, are expected to make this year exceptionally profitable for many other Wall Street companies as well.
Earlier versions of this article gave an incorrect street address for the BMW of Manhattan showroom on Wall Street.