Goldman Sachs paid its bankers an average of $383,000 (£233,000) in 2013, after profits for the year rose by 5% to $8bn.

Putting a fresh focus on the debate over bankers' pay, Goldman's 32,900 global employees will be told the size of their individual bonuses on Thursday.

The bank set aside $2.19bn in the quarter ending December 31 to compensate employees, up 11% from a year earlier but down 8.1% from the previous quarter. Goldman partners were told about their bonuses on Wednesday.

In the fourth quarter of 2013, Goldman's profits fell 21% to $2.2bn and after it made provisions for litigation and regulatory proceedings of $561m, more than double the $260m of a year ago.

The fall came as its fixed-income trading operation, usually the powerhouse of the Wall Street firms, suffered a fall in profits. Goldman's fixed-income, currencies and commodities business posted revenue of $8.65bn, down 13% from last year and the worst year for bond trading since 2005.

In remarks that may indicate the firm is expecting a strong start to the new year, Goldman said its backlog of investment transactions at the end of the year had "increased significantly" compared with 2012.

But Lloyd Blankfein, chairman and chief executive of Goldman, said that last year had been challenging.

"Our work in advancing our client franchise and in ensuring continued cost discipline has allowed us to provide solid returns even in a somewhat challenging environment," he said.

Blankfein added: "We believe that we are well positioned to generate solid returns as the economy continues to heal and provide considerable upside for our shareholders as conditions materially improve."

In a conference call with analysts, Harvey Schwartz, chief financial officer, said 2013 had been a year of "two steps forward and one step back" for the economy. He said the anticipation of the Federal Reserve's decision to taper off its $85bn-a-month quantitative easing stimulus programme, the government shutdown and ongoing regulatory reform had all contributed uncertainty to the financial markets.

"For a CEO making a decision about a merger, it's a career defining decision," said Schwartz. All the political and economic uncertainty was likely to hold those decisions back, he said. This year he said he hoped the economy would move back to facing "normal, day to day challenges".

"The long-term trend is slowly and steadily improving," he said.

The average pay per head was down on the $400,000 paid last year and the overall pay of $12.6bn was down 3% year-on-year.

The closely watched ratio of pay to revenue – which provides an indicator of the largesse lavished on staff – was down slightly to 36.9%, compared with 37.9% for 2012.

Analysts peppered Schwartz with questions about the investment banks' return on equity, a key profitability measure and one that has fallen since regulators tightened the rules on the risks the banks can take. Goldman reported its return on equity for the quarter was 12.7%. The ratio sank to 6.47% for the same quarter in 2011 but was as high as 24.52% for the quarter ending December 31 2009.

Goldman and other banks have been trimming costs as they have fought to improve shareholder returns in a weak trading environment. The firm has moved jobs to lower-cost cities such as Bangalore and Salt Lake City and away from New York and London.

Even though the fourth quarter profits fell, Goldman's performance beat the expectations of Wall Street in contrast to Citigroup which also reported results on Thursday which, while they were up, were lower than had been expected.

"Although we didn't finish the year as strongly as we would have liked, we made substantial progress towards our key priorities in 2013," Michael Corbat, chief executive of Citi said.

Even though the fourth quarter profits fell, Goldman's performance beat the expectations of Wall Street – in contrast to Citigroup, which also reported results on Thursday that, while they were up, were lower than had been expected.

"Although we didn't finish the year as strongly as we would have liked, we made substantial progress towards our key priorities in 2013," said Michael Corbat, the chief executive of Citi.