Goldman Sachs euphemistically explained yesterday why banking careers aren't what they used to be
Goldman Sachs is having a great time. In yesterday's investor call, CEO David Solomon explained that "we're in a top quartile environment" and pointed out that he had said so three times. "Capital markets activities are strong," Solomon said, while acknowledging that the macro situation is "a little bit more complicated."
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In these top quartile times, it might be expected that Goldman Sachs would be hiring and paying. To some extent, this is true. Once again, though, there's a disconnect between the times for banks and the times for their employees.
Speaking yesterday, Denis Coleman, Goldman's CFO, explained that Goldman is focused on growing its revenues, while reducing the proportion of those revenues that it spends on compensating employees.
"As we look at ways that we can invest to grow the firm, grow the earnings of the firm, scale the firm, we are building durable platform-connected types of businesses," said Coleman. "And over time, we should not have the same degree of headcount-related expenses that we might have historically to grow and scale the firm."
In Goldman parlance, 'platform-connected' businesses are businesses that allow revenues to increase rapidly without having to add extra people. These businesses include the financing businesses that sit in prime services, said Coleman. Equities financing revenues at the firm rose 96% year-on-year in the third quarter, but this was mostly thanks to "the firm's financial resources and risk appetite," Coleman explained.
The subtext is that Goldman has not had to hire new people to grow. In the year to the end of September, headcount at the firm fell by 800 people. In the third quarter, 1,300 people were added, but this included up to 2,500 new graduates and entry level hires.
For some people at Goldman, though, things are still very good. These people include David Solomon, who will receive stock worth circa $100m in the next few weeks once a historic bonus vests. Pay per head for the average Goldman employee was around $350k for the first nine months of this year, up 19% on the same period of 2025.
Coleman also said that the "very, very best people" are still very much in demand and that Goldman will "compensate them appropriately." These people include "business professionals" and engineers.
At the same time, though, the emphasis is on building a business that can grow, while spending proportionately less on employees. This is why compensation spending as a proportion of revenues at Goldman was only 27.4% in the third quarter, its lowest Q3 level since 2021. It's also why the compensation ratio for the first nine months as a whole is the lowest for at least five years.
This trend will continue, said Coleman. The future is about "sustainably delivering operating leverage to our shareholders." It's not about hiring a lot of expensive new people.
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