Goldman Sachs cuts bankers' payouts in response to public outcry

Goldman Sachs is to cut compensation to its 35,400 staff after its profits plunged in the third quarter and in response to a public outcry against its highly paid bankers. The American investment bank set aside $13.1bn (£8.3bn) for compensation and benefits, 21% less than last year, averaging $370,706 per head for their work during the first nine months of the year. The company cut its full-year ratio of compensation to revenue to 35.8%, the lowest since the company went public in 1999. "They recognise that the world has changed," Brad Hintz, an analyst at Sanford C Bernstein, told Bloomberg. "The only way to improve your return on assets is to control compensation." Last week, JP Morgan said it would keep 39% of its revenue to pay employees, up from 38% this year. Investment banks, which benefited from billions of pounds of taxpayer funded bailouts to the financial system two years ago, say high bonuses help to keep talented employees. Goldman Sachs, which employs more than 5,000 people in Britain, is also battling to improve its reputation. Earlier this year, it was forced to settle a fraud lawsuit from the US financial watchdog, which accused the bank of selling products without letting clients know that a third party, betting against the same product, had helped create the product itself. Goldman has also been ostracised by some European countries, such as Greece, from their sovereign bond sales, the Guardian revealed earlier this year. And its chief executive, Lloyd Blankfein, drew public anger over his comment that his bank did: "God's work". While the bank remains the world's top adviser on mergers and acquisitions this year its net income of $1.9bn in the third quarter was 40% lower than last year. The shares rose 2.3% to $157 by mid session in New York. Revenue from trading in bonds, currencies and commodities fell 37% to $3.7bn, from last year, as financial markets have been turbulent since the sovereign credit crisis sent southern European bonds diving in May. Investors have flocked to alternative assets to avoid credit and equity markets. Bank of America, the biggest US lender, posted a third quarter loss of $7.3bn, fuelled by higher costs related to new credit card and consumer accounts regulation. Excluding a one-time writedown, the bank earned $3.1bn. The global group posted a $1.4bn profit, almost half from the $2.2bn earned last year.