One of the many complaints emanating from bankers at Goldman Sachs since the Securities and Exchange Commission announced the action against it last week was that it was being penalised for doing a better job than its rivals. They have a point. Yesterday's results for the first quarter rammed home that it has exploited the current exceptional conditions much more adeptly than its rivals. But those results have to appeal to two very different constituencies: politicians and shareholders.
Most of its revenues for the period – some 80 per cent – came from trading and principal investments. Investment banking and asset management revenues have fallen since the last quarter of last year, even as the traders have increased their revenues by 60 per cent. Even so, such results amply justify Goldman shares' strong outperformance of the rest of the financial sector over the period of the crisis.
Goldman has even done shareholders a favour by sharing more of its revenues with them, rather than paying them out as compensation, which accounted for only 43 per cent of net revenues, down from 50 per cent a year earlier. This is Goldman's lowest ever compensation ratio as a public company. The fall in the compensation ratio accounts for 17 per cent of its pre-tax earnings for the quarter, or $900m. The group did this even though it actually increased staff by almost 5 per cent during the past 12 months, to 33,100.